Loan Numbers Could Spell Trouble for AmeriCredit

Car buyers know to be suspicious of bargains at dealerships. The same skepticism should be exercised by investors now looking at auto-loan maker AmeriCredit (ACF Quote), which is trading at what looks like a fire-sale price after the Sept. 11 attacks.

Fearing the terrorist strikes could weaken the economy and cause more borrowers to default, investors have rushed to dump AmeriCredit, which lends to people with spotty credit histories. Now, down 25% since the attacks, AmeriCredit looks to be one of the market's most alluring bargains.

The company expects to earn as much as $3.96 a share in its fiscal year ending June 30, 2002, up more than 50% from 2001. Normally, investors would have to pay through the nose for that sort of red-hot growth rate, but the stock, at $30, is trading at a mere 7.6 times 2002 earnings. ...