QCR Holdings has had an impressive run over the past six months as its shares have beaten the S&P 500 by 7.8%. The stock now trades at $96.64, marking a 14% gain. This run-up might have investors contemplating their next move.
Is now the time to buy QCR Holdings, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is QCR Holdings Not Exciting?
Despite the momentum, we’re swiping left on QCR Holdings for now. Here are three reasons you should be careful with QCRH, plus one stock we’d rather own.
1. Net Interest Income Points to Soft Demand
Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.
QCR Holdings’s net interest income has grown at a 8.9% annualized rate over the last five years, slightly worse than the broader banking industry. Its growth was driven by an increase in its outstanding loans as its net interest margin, which represents how much a bank earns in relation to its outstanding loan book, was flat throughout that period.
2. Projected Net Interest Income Growth Is Slim
Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect QCR Holdings’s net interest income to rise by 4.9%, a deceleration versus its 9.5% annualized growth for the past two years. This projection is below its 9.5% annualized growth rate for the past two years.
Final Judgment
QCR Holdings’s business quality ultimately falls short of our standards. With its shares topping the market in recent months, the stock trades at 1.3× forward P/B (or $96.64 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re fairly confident there are better stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of QCR Holdings
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