Financial Analysis: FirstCash (NASDAQ:FCFS) and Credit Acceptance (NASDAQ:CACC)

FirstCash (NASDAQ:FCFS) and Credit Acceptance (NASDAQ:CACC) are both mid-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, dividends, profitability, risk, institutional ownership and earnings.

Analyst Ratings

This is a summary of current recommendations and price targets for FirstCash and Credit Acceptance, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FirstCash	0	2	3	1	2.83
Credit Acceptance	0	3	1	0	2.25

FirstCash currently has a consensus target price of $199.25, suggesting a potential downside of 2.33%. Credit Acceptance has a consensus target price of $557.50, suggesting a potential downside of 2.01%. Given Credit Acceptance’s higher probable upside, analysts plainly believe Credit Acceptance is more favorable than FirstCash.

Profitability

This table compares FirstCash and Credit Acceptance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FirstCash	9.42%	19.65%	8.38%
Credit Acceptance	19.49%	29.95%	5.33%

Insider and Institutional Ownership

80.3% of FirstCash shares are held by institutional investors. Comparatively, 81.7% of Credit Acceptance shares are held by institutional investors. 2.9% of FirstCash shares are held by insiders. Comparatively, 6.1% of Credit Acceptance shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation and Earnings

This table compares FirstCash and Credit Acceptance”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FirstCash	$3.66 billion	2.42	$330.38 million	$8.76	23.29
Credit Acceptance	$2.32 billion	2.57	$423.90 million	$40.24	14.14

Credit Acceptance has lower revenue, but higher earnings than FirstCash. Credit Acceptance is trading at a lower price-to-earnings ratio than FirstCash, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

FirstCash has a beta of 0.53, indicating that its stock price is 47% less volatile than the S&P 500. Comparatively, Credit Acceptance has a beta of 1.36, indicating that its stock price is 36% more volatile than the S&P 500.

Summary

Credit Acceptance beats FirstCash on 9 of the 15 factors compared between the two stocks.

About FirstCash

FirstCash Holdings, Inc, together with its subsidiaries, operates retail pawn stores in the United States, Mexico, and rest of Latin America. The company operates in three segments: U.S. Pawn, Latin America Pawn, and Retail POS Payment Solutions segments. Its pawn stores lend money on the collateral of pledged personal property, including jewelry, electronics, tools, appliances, sporting goods, and musical instruments; and retails merchandise acquired through collateral forfeitures on forfeited pawn loans and over-the-counter purchases of merchandise directly from customers. The company also provides retail POS payment solutions, which focuses on LTO products and facilitating other retail financing payment options across the network of traditional and e-commerce merchant partners. It serves cash and credit-constrained consumers. The company was formerly known as FirstCash, Inc and changed its name to FirstCash Holdings, Inc. in December 2021. FirstCash Holdings, Inc was incorporated in 1988 and is headquartered in Fort Worth, Texas.

About Credit Acceptance

Credit Acceptance Corporation engages in the provision of financing programs, and related products and services in the United States. The company advances money to automobile dealers in exchange for the right to service the underlying consumer loans; and buys the consumer loans from the dealers and keeps the amount collected from the consumers. It is also involved in the business of reinsuring coverage under vehicle service contracts sold to consumers by dealers on vehicles financed by the company. The company serves independent and franchised automobile dealers. Credit Acceptance Corporation was incorporated in 1972 and is headquartered in Southfield, Michigan.