Shares of Quest Resource Holding Corp (QRHC, Financial) experienced a significant drop of 31.95% recently, trading at a price of $2.62. The decline followed the release of the company's fourth-quarter report, which revealed both minimal revenue growth and a substantial decline in EBITDA, falling short of market expectations.
Quest Resource Holding Corp, operating in the Waste Management industry, offers waste and recycling services across multiple sectors. Despite having some positive attributes, such as insider buying and a stock price nearing a 3-year low, the company faces several financial challenges. Currently, it shows a market capitalization of $53.94 million and a price-to-sales (PS) ratio of 0.28, close to its 3-year low of 0.27, indicating a potentially undervalued status. However, the PE ratio stands at 0, which reflects ongoing net losses.
The company is rated a "Possible Value Trap" according to its GF Value, priced at $7.63, suggesting that while there might be potential, investors should exercise caution. The company's Altman Z-Score of 1.16 highlights financial distress, indicating a potential risk of bankruptcy in the next two years. Furthermore, Quest Resource continues to issue new debt, resulting in a high debt-to-equity ratio of 1.46, and a limited interest coverage ratio of 0.1.
From a profitability perspective, Quest Resource's gross margin has seen consistent declines with an average yearly reduction of 2.3%. Both its operating and net margins are concerning, with operating margins declining at an average of 9.7% per year. The negative Return on Equity (ROE) of -23.9% and Return on Assets (ROA) of -8.45% further illustrate the underlying challenges in achieving profitability.
While the stock does enjoy some good signs, such as a strong Beneish M-Score indicating low manipulation risk and recent insider purchases, the overall financial health remains precarious. For investors considering QRHC, it is advisable to weigh these financial risks carefully against any potential future gains, especially in light of its volatile stock performance and unpredictable financial outlook.
