Encore Capital Group (NASDAQ: ECPG) and Credit Acceptance Corporation (NASDAQ:CACC) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, risk, valuation, earnings and dividends.
Insider & Institutional Ownership
73.0% of Credit Acceptance Corporation shares are held by institutional investors. 8.8% of Encore Capital Group shares are held by company insiders. Comparatively, 5.8% of Credit Acceptance Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Volatility & Risk
Encore Capital Group has a beta of 1.76, meaning that its stock price is 76% more volatile than the S&P 500. Comparatively, Credit Acceptance Corporation has a beta of 0.51, meaning that its stock price is 49% less volatile than the S&P 500.
Analyst Recommendations
This is a summary of current ratings and price targets for Encore Capital Group and Credit Acceptance Corporation, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Encore Capital Group | 0 | 4 | 1 | 0 | 2.20 |
| Credit Acceptance Corporation | 4 | 5 | 0 | 0 | 1.56 |
Encore Capital Group currently has a consensus price target of $35.90, indicating a potential downside of 10.47%. Credit Acceptance Corporation has a consensus price target of $204.88, indicating a potential downside of 25.04%. Given Encore Capital Group’s stronger consensus rating and higher possible upside, analysts clearly believe Encore Capital Group is more favorable than Credit Acceptance Corporation.
Profitability
This table compares Encore Capital Group and Credit Acceptance Corporation’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Encore Capital Group | 6.28% | 12.38% | 1.86% |
| Credit Acceptance Corporation | 35.13% | 32.24% | 8.71% |
Valuation & Earnings
This table compares Encore Capital Group and Credit Acceptance Corporation’s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| Encore Capital Group | $1.01 billion | 1.02 | $257.54 million | $2.44 | 16.43 |
| Credit Acceptance Corporation | $840.30 million | 6.33 | $357.05 million | $18.35 | 14.89 |
Credit Acceptance Corporation has higher revenue, but lower earnings than Encore Capital Group. Credit Acceptance Corporation is trading at a lower price-to-earnings ratio than Encore Capital Group, indicating that it is currently the more affordable of the two stocks.
Encore Capital Group Company Profile
Encore Capital Group, Inc., through its subsidiaries, is a specialty finance company providing debt recovery solutions for consumers and property owners across a range of financial assets. The Company operates through Portfolio Purchasing and Recovery segment. The Company’s geographical segments include the United States, Europe and other. The Company’s portfolios of defaulted consumer receivables at discounts and manages them by partnering with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial commitments to credit originators, including banks, credit unions, consumer finance companies, commercial retailers, and telecommunication companies. Defaulted receivables also include receivables subject to bankruptcy proceedings. The Company through certain subsidiaries, is engaged in portfolio purchasing and recovery in the United States, including Puerto Rico.
Credit Acceptance Corporation Company Profile
Credit Acceptance Corporation offers financing programs that enable automobile dealers to sell vehicles to consumers. The Company’s financing programs are offered through a network of automobile dealers. The Company has two Dealers financing programs: the Portfolio Program and the Purchase Program. Under the Portfolio Program, the Company advances money to dealers (Dealer Loan) in exchange for the right to service the underlying consumer loans. Under the Purchase Program, the Company buys the consumer loans from the dealers (Purchased Loan) and keeps the amounts collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as Loans. As of December 31, 2016, the Company’s target market included approximately 60,000 independent and franchised automobile dealers in the United States. The Company has market area managers located throughout the United States that market its programs to dealers, enroll new dealers and support active dealers.
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