Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK ( TheStreet) -- Credit Acceptance Corporation (Nasdaq: CACC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.
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- CACC's revenue growth has slightly outpaced the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 15.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The gross profit margin for CREDIT ACCEPTANCE CORP is rather high; currently it is at 69.10%. Regardless of CACC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CACC's net profit margin of 37.56% significantly outperformed against the industry.
- Although CACC's debt-to-equity ratio of 2.01 is very high, it is currently less than that of the industry average.
-- Written by a member of TheStreet Ratings Staff