QCR Holdings, Inc. (NASDAQ:QCRH) shares are up more than 3.23% this year and recently decreased -0.45% or -$0.2 to settle at $44.70. ACNB Corporation (NASDAQ:ACNB), on the other hand, is down -10.88% year to date as of 11/22/2017. It currently trades at $27.85 and has returned 1.09% during the past week.
QCR Holdings, Inc. (NASDAQ:QCRH) and ACNB Corporation (NASDAQ:ACNB) are the two most active stocks in the Regional – Southwest Banks industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect QCRH to grow earnings at a 10.00% annual rate over the next 5 years.
Profitability and Returns
Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return., compared to an EBITDA margin of 36.22% for ACNB Corporation (ACNB). QCRH’s ROI is 19.60% while ACNB has a ROI of 27.30%. The interpretation is that ACNB’s business generates a higher return on investment than QCRH’s.
The amount of free cash flow available to investors is ultimately what determines the value of a stock. QCRH’s free cash flow (“FCF”) per share for the trailing twelve months was +0.40. Comparatively, ACNB’s free cash flow per share was +0.21. On a percent-of-sales basis, QCRH’s free cash flow was 0% while ACNB converted 0% of its revenues into cash flow. This means that, for a given level of sales, QCRH is able to generate more free cash flow for investors.
QCRH’s debt-to-equity ratio is 0.35 versus a D/E of 0.00 for ACNB. QCRH is therefore the more solvent of the two companies, and has lower financial risk.
QCRH trades at a forward P/E of 14.69, a P/B of 1.88, and a P/S of 4.78, compared to a P/B of 1.27, and a P/S of 4.17 for ACNB. QCRH is the expensive of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. QCRH is currently priced at a -14.04% to its one-year price target of 52.00. Risk and Volatility
No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. QCRH has a beta of 0.60 and ACNB’s beta is 0.22. ACNB’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. QCRH has a short ratio of 1.65 compared to a short interest of 3.09 for ACNB. This implies that the market is currently less bearish on the outlook for QCRH.
ACNB Corporation (NASDAQ:ACNB) beats QCR Holdings, Inc. (NASDAQ:QCRH) on a total of 7 of the 13 factors compared between the two stocks. ACNB is growing fastly and has lower financial risk. In terms of valuation, ACNB is the cheaper of the two stocks on an earnings, book value and sales basis, Finally, VBTX has better sentiment signals based on short interest.