Credit Acceptance Corporation
Thesis
Credit Acceptance is facing declining loan-level returns and increasing provisions for credit losses, which will negatively impact its earnings. The company is under-provisioned compared to peers, and its current valuation suggests limited upside. We project EPS to decline by 13% over the next three years, leading to a price target of $210, which is 33% below the current stock price.
Did it work?
The short thesis played out decisively: Credit Acceptance's stock fell approximately 89.5% over the ~8.3 years since the pitch, far exceeding the stated 33% downside to the $210 target and well beyond the 3-year horizon. The magnitude of the decline is consistent with the thesis's core claim that deteriorating loan-level returns and rising credit loss provisions would impair earnings and valuation. With the full stated horizon long elapsed and the downside target dramatically exceeded, the thesis is confirmed.