Little Excitement Around Quest Resource Holding Corporation's (NASDAQ:QRHC) Revenues As Shares Take 26% Pounding

Unfortunately for some shareholders, the Quest Resource Holding Corporation (NASDAQ:QRHC) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 77% share price decline.

After such a large drop in price, when close to half the companies operating in the United States' Commercial Services industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider Quest Resource Holding as an enticing stock to check out with its 0.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

We've discovered 3 warning signs about Quest Resource Holding. View them for free.

View our latest analysis for Quest Resource Holding

How Has Quest Resource Holding Performed Recently?

Recent times haven't been great for Quest Resource Holding as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Quest Resource Holding's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Quest Resource Holding's to be considered reasonable.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. However, a few strong years before that means that it was still able to grow revenue by an impressive 85% in total over the last three years. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Turning to the outlook, the next year should generate growth of 5.4% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.1%, which is noticeably more attractive.

In light of this, it's understandable that Quest Resource Holding's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Quest Resource Holding's P/S

The southerly movements of Quest Resource Holding's shares means its P/S is now sitting at a pretty low level. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Quest Resource Holding maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

It is also worth noting that we have found 3 warning signs for Quest Resource Holding that you need to take into consideration.

If these risks are making you reconsider your opinion on Quest Resource Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.