Insider Decision: Prescott General Partners LLC Offloads $5.15M Worth Of Credit Acceptance Stock

Revealing a significant insider sell on September 19, Prescott General Partners LLC, 10% Owner at Credit Acceptance CACC, as per the latest SEC filing.

What Happened: LLC's decision to sell 11,586 shares of Credit Acceptance was revealed in a Form 4 filing with the U.S. Securities and Exchange Commission on Thursday. The total value of the sale is $5,154,730.

Monitoring the market, Credit Acceptance's shares down by 0.0% at $464.21 during Friday's morning.

Discovering Credit Acceptance: A Closer Look

Credit Acceptance Corp is a consumer finance company that specializes in automobile loans. These loans are offered through a U.S. nationwide network of automobile dealers that benefit from sales of vehicles to consumers who could otherwise not obtain financing. The company also benefits from repeat and referral sales, and from sales to customers responding to advertisements for financing, but qualify for traditional financing. The company derives its revenue from finance charges, premiums earned on the reinsurance of vehicle service contracts, and other fees. Of these, financing charges, including servicing fees, are by far a source of revenue.

Key Indicators: Credit Acceptance's Financial Health

Revenue Growth: Over the 3 months period, Credit Acceptance showcased positive performance, achieving a revenue growth rate of 12.42% as of 30 June, 2024. This reflects a substantial increase in the company's top-line earnings. In comparison to its industry peers, the company trails behind with a growth rate lower than the average among peers in the Financials sector.

Key Insights into Profitability Metrics:

• Gross Margin: The company maintains a high gross margin of 62.24%, indicating strong cost management and profitability compared to its peers.

• Earnings per Share (EPS): Credit Acceptance's EPS is below the industry average, signaling challenges in bottom-line performance with a current EPS of -3.83.

Debt Management: The company faces challenges in debt management with a debt-to-equity ratio higher than the industry average. With a ratio of 3.82, caution is advised due to increased financial risk.

Assessing Valuation Metrics:

• Price to Earnings (P/E) Ratio: The current P/E ratio of 33.04 is below industry norms, indicating potential undervaluation and presenting an investment opportunity.

• Price to Sales (P/S) Ratio: With a higher-than-average P/S ratio of 2.97, Credit Acceptance's stock is perceived as being overvalued in the market, particularly in relation to sales performance.

• EV/EBITDA Analysis (Enterprise Value to its Earnings Before Interest, Taxes, Depreciation & Amortization): A high EV/EBITDA ratio of 42.5 positions the company as being more valued compared to industry benchmarks.

Market Capitalization Analysis: Reflecting a smaller scale, the company's market capitalization is positioned below industry averages. This could be attributed to factors such as growth expectations or operational capacity.

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Delving Into the Significance of Insider Transactions

Insider transactions serve as a piece of the puzzle in investment decisions, rather than the entire picture.

Exploring the legal landscape, an "insider" is defined as any officer, director, or beneficial owner holding more than ten percent of a company's equity securities, as stipulated by Section 12 of the Securities Exchange Act of 1934. This encompasses executives in the c-suite and major hedge funds. These insiders are required to report their transactions through a Form 4 filing, which must be submitted within two business days of the transaction.

Highlighted by a company insider's new purchase, there's a positive anticipation for the stock to rise.

But, insider sells may not necessarily indicate a bearish view and can be motivated by various factors.

The Insider's Guide to Important Transaction Codes

Taking a closer look at transactions, investors often prioritize those unfolding in the open market, meticulously cataloged in Table I of the Form 4 filing. A P in Box 3 denotes a purchase, while S signifies a sale. Transaction code C denotes the conversion of an option, and transaction code A signifies a grant, award, or other acquisition of securities from the company.

Check Out The Full List Of Credit Acceptance's Insider Trades.

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This article was generated by Benzinga's automated content engine and reviewed by an editor.