There's No Escaping Quest Resource Holding Corporation's (NASDAQ:QRHC) Muted Revenues Despite A 52% Share Price Rise

Quest Resource Holding Corporation (NASDAQ:QRHC) shareholders would be excited to see that the share price has had a great month, posting a 52% gain and recovering from prior weakness. But the last month did very little to improve the 70% share price decline over the last year.

Even after such a large jump in price, Quest Resource Holding may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Commercial Services industry in the United States have P/S ratios greater than 1.1x and even P/S higher than 5x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for Quest Resource Holding

How Has Quest Resource Holding Performed Recently?

While the industry has experienced revenue growth lately, Quest Resource Holding's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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Is There Any Revenue Growth Forecasted For Quest Resource Holding?

In order to justify its P/S ratio, Quest Resource Holding would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 9.2%. As a result, revenue from three years ago have also fallen 2.6% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 1.1% over the next year. That's not great when the rest of the industry is expected to grow by 5.4%.

With this in consideration, we find it intriguing that Quest Resource Holding's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does Quest Resource Holding's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Quest Resource Holding's P/S close to the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It's clear to see that Quest Resource Holding maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Quest Resource Holding you should know about.

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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.