Is Now An Opportune Moment To Examine Quest Resource Holding Corporation (NASDAQ:QRHC)?

Quest Resource Holding Corporation (NASDAQ:QRHC), might not be a large cap stock, but it led the NASDAQCM gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Quest Resource Holding’s outlook and valuation to see if the opportunity still exists.

See 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 46.44x is above its peer average of 34.67x, which suggests the stock is trading at a higher price compared to the Commercial Services industry. If you like the stock, you may want to keep an eye out for a potential price decline 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?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for Quest Resource Holding. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

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 tabs on QRHC for some time, 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 optimistic prospect is encouraging for QRHC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Quest Resource Holding, you'd also look into what risks it is currently facing. For example - Quest Resource Holding has 2 warning signs we think you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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