One-glance verdict
Undervalued
$85.49 our estimate vs market $56.38
Wall Street consensus: $76.50 (-10.5% lower than our fair-value estimate)
34% below our estimate, below the bear case
Fundamentals snapshot
Q2 Holdings, Inc.
QTWO · NYQ · Technology · Software - Application
Current price
$56.38
52-week range
$40.79 - $76.24
Market cap
$3.52B
Balance sheet
Healthy
8.11x Adequate
Net cash $65.49M. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
1 Risk
3 rewards · 1 risks
- Reward Revenue grew 6.5% last year.
- Reward Returns 15.0% on equity, ahead of 40% of its peers.
- Reward Free cash flow was positive in 5/10 years.
- Risk Insider ownership is only 0.8% (peer median: 2.2%).
What this company does
Q2 Holdings, Inc.
Q2 Holdings provides the digital banking software that powers the mobile apps and websites for many community banks and credit unions. The company makes money by selling these technology platforms as subscriptions, which creates recurring revenue (income that is predictable and likely to continue in the future). This allows smaller financial institutions to offer modern and secure services to compete with larger banks without having to build the technology themselves.
How the company got here
Founded in 2004, Q2 was created with the mission of helping smaller banks and credit unions compete with larger financial institutions by providing them with powerful technology. The company started by developing a comprehensive software platform that could handle all the needs of a modern bank, from online and mobile banking to managing loans. This single-platform approach was a key turning point, allowing community banks to offer the same slick digital experience as the big national players without having to build the technology themselves. Over the years, Q2 has grown by continually innovating and expanding its services to include things like fraud protection and data analytics.
What it actually does
Think about the app you use to check your bank account balance, deposit a check by taking a picture, or send money to a friend. Q2 Holdings is the company that builds and runs that kind of software for hundreds of banks and credit unions. Instead of each financial institution creating its own technology from scratch, they hire Q2 to provide a ready-made, secure, and easy-to-use digital banking platform. Q2's products handle everything from the basic online banking you see as a customer to more complex behind-the-scenes operations for the financial institution itself.
Digital Banking Platform
This is the core of Q2's business and makes up the vast majority of its revenue (the money it brings in from sales). Financial institutions pay Q2 a recurring fee, much like a subscription, to use its comprehensive suite of digital tools. This includes the mobile banking apps and websites that customers use for their daily banking needs. It also provides the bank with tools to manage customer relationships, open new accounts, and offer various financial products online.
Digital Lending and Other Solutions
Beyond everyday banking, Q2 offers specialized software for lending. This helps banks and other financial companies manage the entire loan process digitally, from application to approval and ongoing management. The company also provides solutions for things like security and fraud prevention, helping institutions protect their customers' accounts from unauthorized access. Another offering is the Q2 Innovation Studio, which allows other financial technology companies (fintechs) to build their own applications that connect with Q2's platform.
Helix
Helix is a newer, fast-growing part of the company that provides what's known as a 'cloud-native core processing platform'. Think of this as the fundamental brain and accounting system for a bank, but built to be more modern, flexible, and efficient than older systems. This service is designed not just for traditional banks, but also for technology companies that want to embed banking services, like accounts and payments, directly into their own apps. While a smaller piece of the business, it represents a significant area of future growth.
What management is betting on now
Q2's leadership is heavily focused on expanding the use of Artificial Intelligence (AI) across its products. They are using AI to help banks become more efficient, detect fraud more effectively, and offer more personalized experiences to their customers. The company is also making a big push to sell more of its different services to its existing customers, a strategy known as cross-selling. Finally, management is emphasizing partnerships with other financial technology companies to accelerate innovation and bring new capabilities to their bank and credit union clients more quickly.
Price history
How the share price has moved
—
Loading price history…
Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q3
$40.85M
FY2024 Q4
$41.60M
FY2025 Q1
$42.75M
FY2025 Q2
$47.33M
FY2025 Q3
$42.88M
FY2025 Q4
$61.70M
FY2026 Q1
$49.72M
FY2026 Q2
$58.95M
Revenue
$219.76M
Net income
$29.86M
Diluted EPS
0.46
Operating cash flow
$60.65M
Free cash flow
$58.95M
Fetching…
Sources
Revenue
$216.51M
Net income
$26.64M
Diluted EPS
0.40
Operating cash flow
$56.32M
Free cash flow
$49.72M
Fetching…
Sources
Revenue
$208.22M
Net income
$20.44M
Diluted EPS
0.32
Operating cash flow
$63.70M
Free cash flow
$61.70M
Fetching…
Sources
Revenue
$201.70M
Net income
$15.05M
Diluted EPS
0.23
Operating cash flow
$45.59M
Free cash flow
$42.88M
Fetching…
Sources
Revenue
$195.15M
Net income
$11.76M
Diluted EPS
0.18
Operating cash flow
$48.64M
Free cash flow
$47.33M
Fetching…
Sources
Revenue
$189.74M
Net income
$4.75M
Diluted EPS
0.07
Operating cash flow
$43.53M
Free cash flow
$42.75M
Fetching…
Sources
Revenue
$183.04M
Net income
$164.00K
Diluted EPS
0.01
Operating cash flow
$43.03M
Free cash flow
$41.60M
Fetching…
Sources
Revenue
$175.02M
Net income
$-11.80M
Diluted EPS
-0.20
Operating cash flow
$43.25M
Free cash flow
$40.85M
Fetching…
Sources
Is it cheap or expensive?
Fair value $85.49 vs current price $56.38
Wall Street consensus is the average analyst price target: $76.50 (-10.5% lower than our fair-value estimate).
Our most-likely fair value is $85.49 a share — about 51.6% above today's price of $56.38, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Healthy
Net cash $65.5M - more cash than debt. Interest coverage 8.1x.
Net debt
$-65.49M
Interest coverage
8.11x
Q2 Holdings, Inc.'s profit covers its interest bill about 8.1 times over. which is stronger than most peers shown here and 2 peers sit below 1x, which is the danger zone where profit does not fully cover the interest bill.
Healthy
Worse cushion
Baseline
Better cushion
QTWO
BASELINE
Q2 Holdings, Inc.
Total debt $40.93M Interest coverage 8.11x This is the baseline the peer rows are being compared against.
Total debt $358.16M Interest coverage -5.11x -100% vs QTWO This peer has almost no interest-payment cushion compared with QTWO.
Total debt $338.63M Interest coverage 0.21x -97% vs QTWO Carries about 38.0x less debt cushion than QTWO.
Total debt $77.82M Interest coverage 117.88x +1,353% vs QTWO Carries about 14.5x more debt cushion than QTWO.
Total debt $863.59M Interest coverage 5.70x -30% vs QTWO Carries about 1.4x less debt cushion than QTWO.
Total debt — Interest coverage 3.72x -54% vs QTWO Carries about 2.2x less debt cushion than QTWO.
What you should know
The case for and against QTWO
3 Rewards
1 Risk
Rewards
-
Revenue grew 6.5% last year.
-
Returns 15.0% on equity, ahead of 40% of its peers.
-
Free cash flow was positive in 5/10 years.
Risks
-
Insider ownership is only 0.8% (peer median: 2.2%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
39.70x
Forward P/E
16.73x
P/B
5.46x
P/S
4.15x
EV/EBITDA
30.18x
PEG ratio
8.35x
Profitability
How much profit each dollar creates
Gross margin
57.0%
Operating margin
13.4%
Net margin
10.9%
ROE
15.0%
ROA
4.5%
Health
Liquidity and balance-sheet strength
Debt / equity
0.06x
Current ratio
0.94x
Quick ratio
0.72x
Total debt
$40.93M
Total cash
$106.42M
Growth
How the business has been compounding
Revenue TTM
$846.20M
Revenue 5Y CAGR
12.4%
EPS TTM
1.42
EPS 5Y CAGR
—
Cash flow
How much cash the business throws off
Operating CF TTM
$226.26M
Free CF TTM
$194.65M
FCF margin
23.0%
Dividend
Shareholder payout
Yield
—
Payout ratio
0.0%
Last ex-div date
—