Q2 Holdings

Q2 Holdings Inc is assigned a 4-star quantitative star rating, reflecting our opinion that this share class offers a somewhat attractive opportunity for investors. The stock currently trades at a 12% discount to our quantitative fair value estimate of $65.85 per share, which is reinforced by this estimate's low uncertainty rating.

The company's solid growth increases our estimated valuation. Consistent revenue and earnings growth indicates a company's potential for increased market share and profitability. Reflecting the firm's growth is its EPS 5-year growth of 49.0%, which sits in the top 10% compared with global peers. The robust five-year track record of EPS growth is reason to be optimistic about the firm's shares. We believe this is a sign that shares could be cheap.

Alternatively, the company's valuation metrics are potentially concerning. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's book value yield of 18.3%, for example, ranks in the bottom 20% globally. The market value of this company's shares looks expensive relative to the book (accounting) value of equity, which, despite our favorable price/fair value ratio, is a negative attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has been a laggard relative to the broader universe over the past year. This underperformance makes the stock appear cheap, which portends a buying opportunity in light of other contributors to our model.

The company's narrow quantitative moat rating indicates it could outearn its cost of capital and maintain robust margins for 10 years or longer. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.