At US$5.05, Is Quest Resource Holding Corporation (NASDAQ:QRHC) Worth Looking At Closely?

While Quest Resource Holding Corporation (NASDAQ:QRHC) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to US$7.76 at one point, and dropping to the lows of US$5.05. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Quest Resource Holding's current trading price of US$5.05 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Quest Resource Holding’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Quest Resource Holding

What's the opportunity in Quest Resource Holding?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Quest Resource Holding’s ratio of 56.88x is above its peer average of 22.94x, which suggests the stock is trading at a higher price compared to the Commercial Services industry. But, is there another opportunity to buy low in the future? Given that Quest Resource Holding’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Quest Resource Holding look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Quest Resource Holding's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in QRHC’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe QRHC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on QRHC for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for QRHC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 5 warning signs we've spotted with Quest Resource Holding (including 1 which is a bit concerning).

If you are no longer interested in Quest Resource Holding, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.