Critical Analysis: Orix Corp Ads (IX) and Credit Acceptance Corporation (NASDAQ:CACC)

Orix Corp Ads (NYSE: IX) and Credit Acceptance Corporation (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 dividends, analyst recommendations, earnings, institutional ownership, risk, profitability and valuation.

Risk and Volatility

Orix Corp Ads has a beta of 1.45, suggesting that its share price is 45% more volatile than the S&P 500. Comparatively, Credit Acceptance Corporation has a beta of 0.5, suggesting that its share price is 50% less volatile than the S&P 500.

Profitability

This table compares Orix Corp Ads and Credit Acceptance Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Orix Corp Ads 9.95% 10.83% 2.54%
Credit Acceptance Corporation 35.13% 32.24% 8.71%

Earnings & Valuation

This table compares Orix Corp Ads and Credit Acceptance Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Orix Corp Ads $26.51 billion 0.80 $6.30 billion $1.00 80.15
Credit Acceptance Corporation $840.30 million 6.24 $357.05 million $18.35 14.68

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

Dividends

Orix Corp Ads pays an annual dividend of $2.10 per share and has a dividend yield of 2.6%. Credit Acceptance Corporation does not pay a dividend. Orix Corp Ads pays out 210.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional and Insider Ownership

1.9% of Orix Corp Ads shares are owned by institutional investors. Comparatively, 72.7% of Credit Acceptance Corporation shares are owned by institutional investors. 0.1% of Orix Corp Ads shares are owned by company insiders. Comparatively, 5.8% of Credit Acceptance Corporation shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Orix Corp Ads and Credit Acceptance Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Orix Corp Ads 0 0 0 1 4.00
Credit Acceptance Corporation 3 5 0 0 1.63

Credit Acceptance Corporation has a consensus target price of $209.86, indicating a potential downside of 22.11%. Given Credit Acceptance Corporation’s higher possible upside, analysts clearly believe Credit Acceptance Corporation is more favorable than Orix Corp Ads.

Summary

Credit Acceptance Corporation beats Orix Corp Ads on 10 of the 16 factors compared between the two stocks.

About Orix Corp Ads

ORIX Corporation (ORIX) is a financial services company. The Company operates through six segments: Corporate Financial Services, which consists of lending, leasing and fee business; Maintenance Leasing, which consists of automobile leasing and rentals, car sharing, and test and measurement instruments and information technology-related equipment rentals and leasing; Real Estate, which consists of real estate development and rental, facility operation, real estate investment trust (REIT) asset management, and real estate investment advisory services; Investment and Operation, which consists of environment and energy-related business, principal investment and loan servicing (asset recovery); Retail Segment, which consists of life insurance, banking and card loan business, and Overseas Business, which consists of leasing, lending, investment in bonds, investment banking, asset management and ship- and aircraft-related operations.

About Credit Acceptance Corporation

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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