Quest Resource has gotten torched over the last six months - since January 2025, its stock price has dropped 64.8% to $2.06 per share. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Is now the time to buy Quest Resource, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, 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 why QRHC doesn't excite us and a stock we'd rather own.

1. Revenue Growth Flatlining

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 shows its demand has slowed significantly as its revenue was flat over the last two years.

2. Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Quest Resource’s margin dropped by 9 percentage points over the last five years. Almost any movement in the wrong direction is undesirable because it is already burning cash. If the trend continues, it could signal it’s becoming a more capital-intensive business. Quest Resource’s free cash flow margin for the trailing 12 months was negative 3%.

3. Short Cash Runway Exposes Shareholders to Potential Dilution

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 burned through $8.42 million of cash over the last year, and its $76.11 million of debt exceeds the $1.43 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Quest Resource’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Quest Resource until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

Quest Resource falls short of our quality standards. Following the recent decline, the stock trades at 5.8× forward P/E (or $2.06 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere. We’d recommend looking at one of our top digital advertising picks.

Stocks We Like More Than Quest Resource

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