Would Shareholders Who Purchased Credit Acceptance's (NASDAQ:CACC) Stock Year Be Happy With The Share price Today?

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Credit Acceptance Corporation (NASDAQ:CACC) have tasted that bitter downside in the last year, as the share price dropped 32%. That's disappointing when you consider the market returned 22%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 1.9% in three years. The share price has dropped 35% in three months.

Check out our latest analysis for Credit Acceptance

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Credit Acceptance had to report a 32% decline in EPS over the last year. Remarkably, he share price decline of 32% per year is particularly close to the EPS drop. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Credit Acceptance's earnings, revenue and cash flow.

A Different Perspective

Investors in Credit Acceptance had a tough year, with a total loss of 32%, against a market gain of about 22%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Credit Acceptance that you should be aware of before investing here.

Credit Acceptance is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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