Quest Resource’s stock price has taken a beating over the past six months, shedding 39.1% of its value and falling to $1.31 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in Quest Resource, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Quest Resource Will Underperform?
Despite the more favorable entry price, we’re sitting this one out for now. Here are three reasons we avoid QRHC, plus one stock we’d rather own.
1. Revenue Tumbling Downwards
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Quest Resource’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 7.9% over the last two years. 
2. Breakeven Free Cash Flow Limits Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Quest Resource broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.
3. High Debt Levels Increase Risk
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Quest Resource’s $64.64 million of debt exceeds the $1.14 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $9.53 million over the last 12 months) shows the company is overleveraged.
At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Quest Resource could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.
We hope Quest Resource can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of Quest Resource, we’ll be cheering from the sidelines. Following the recent decline, the stock trades at 8.1× forward EV-to-EBITDA (or $1.31 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now. We’d recommend looking at one of our top software and edge computing picks.
Stocks We Like More Than Quest Resource
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
