QCR Holdings Inc (NASDAQ:QCRH), a US$681.4m small-cap, operates in the banking industry, which has been simplifying their business and operating models over the last few years, both for economic reasons and to reduce organizational complexity. Financial services analysts are forecasting for the entire industry, an extremely elevated growth of 36.6% in the upcoming year , and a whopping growth of 44.6% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, and also determine whether QCR Holdings is a laggard or leader relative to its financial sector peers.
What’s the catalyst for QCR Holdings’s sector growth?
The threat of disintermediation in the payments industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the past year, the industry delivered growth in the teens, though still underperforming the wider US stock market. QCR Holdings leads the pack with its impressive earnings growth of 18.9% over the past year. However, analysts are expecting its future earnings growth to be more in-line with the industry average, hovering at 35.0% over the next couple of years.
Is QCR Holdings and the sector relatively cheap?
The banking sector’s PE is currently hovering around 17.9x, relatively similar to the rest of the US stock market PE of 19.86x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 8.2% compared to the market’s 10.6%, potentially indicative of past headwinds. On the stock-level, QCR Holdings is trading at a PE ratio of 15.38x, which is relatively in-line with the average banking stock. In terms of returns, QCR Holdings generated 10.5% in the past year, which is 2.3% over the banking sector.
If QCR Holdings has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is a banking industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the financial sector. However, before you make a decision on the stock, I suggest you look at QCR Holdings’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has QCRH’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of QCR Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.