Here's Why We Think QCR Holdings (NASDAQ:QCRH) Is Well Worth Watching
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like QCR Holdings (NASDAQ:QCRH). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for QCR Holdings
QCR Holdings' Earnings Per Share Are Growing
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, QCR Holdings has grown EPS by 25% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It's noted that QCR Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for QCR Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to US$329m. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for QCR Holdings.
Are QCR Holdings Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
It's pleasing to note that insiders spent US$1.4m buying QCR Holdings shares, over the last year, without reporting any share sales whatsoever. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. Zooming in, we can see that the biggest insider purchase was by Independent Director Brent Cobb for US$463k worth of shares, at about US$46.30 per share.
The good news, alongside the insider buying, for QCR Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$33m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 3.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Larry Helling, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to QCR Holdings, with market caps between US$400m and US$1.6b, is around US$3.4m.
QCR Holdings' CEO took home a total compensation package worth US$1.9m in the year leading up to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is QCR Holdings Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into QCR Holdings' strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with QCR Holdings , and understanding it should be part of your investment process.
The good news is that QCR Holdings is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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