Quest Resource (QRHC) Earnings Preview: Can Margins Turn the Tide?

Quest Resource Holding Corporation (NASDAQ: QRHC) is set to report its first-quarter 2025 earnings on Monday, May 12, after the market close. Analysts are watching closely for signs of stabilization in losses and revenue growth amid persistent operational challenges. With shares trading at $2.39—a 2.1% gain on the day—investors will parse whether QRHC can deliver on its sustainability-driven strategy while navigating a volatile sector. Here’s what to watch for.

Q1 2025 Estimates: Narrowing Losses, Modest Revenue Growth

Analysts project QRHC will report a Q1 2025 loss of $0.05 per share, a slight improvement from the $0.09 EPS miss in Q4 2024. Revenue is expected to rise to $72.04 million, up from Q4’s $69.97 million but still below the $73.63 million target missed last quarter. The sequential revenue gain reflects gradual demand recovery in waste management and recycling services, though QRHC’s narrow margin of safety and reliance on cyclical industries remain concerns.

Key Financial Metrics to Monitor

• Profitability Challenges: QRHC’s net margin of -2.74% and ROE of 3.11% underscore operational inefficiencies. Investors will scrutinize management’s plans to reduce costs and improve margins, such as optimizing route efficiency or renegotiating supplier contracts.
• Liquidity and Leverage: QRHC’s quick and current ratios of 1.52 suggest manageable short-term liquidity, while its debt-to-equity ratio of 1.15 indicates moderate leverage. However, rising interest rates could pressure borrowing costs if debt levels rise further.
• Valuation Signals: QRHC trades at a P/E ratio of -6.46 (due to losses) and a P/E/G ratio of 0.76, signaling potential undervaluation relative to growth expectations. The $6.50 average price target implies a 161% upside from current levels, though execution remains critical.

Analyst Sentiment: Cautious Optimism

QRHC holds a “Moderate Buy” consensus with two Buy ratings and no Sell/Hold recommendations. Northland Securities reaffirmed a $6.50 price target, while Roth MKM’s $13 target from May 2024 highlights long-term bullishness. Analysts attribute this optimism to QRHC’s niche in sustainable waste solutions—a sector benefiting from ESG-driven demand. However, the company’s 0% accuracy in beating EPS estimates over the past year raises red flags, as it underperforms the industry’s 62.84% beat rate.

Risks and Considerations

• Execution Risks: QRHC has consistently missed EPS and revenue targets, with Q4’s $3.66 million revenue shortfall underscoring execution pressures. Investors will demand clarity on whether cost-cutting measures or new contracts can close the gap.
• Sector Volatility: QRHC operates in a cyclical sector tied to economic activity and regulatory changes. Rising interest rates and potential shifts in environmental policies could disrupt its growth trajectory.
• Institutional Activity: Bank of America’s 36.5% stake increase in Q4 2024 and CEO Perry Moss’s recent share purchases signal insider confidence. However, QRHC’s 22.84% insider ownership and institutional ownership of 48.16% suggest limited retail investor participation, which could amplify volatility.

The Bottom Line: Earnings Call Will Be the Litmus Test

QRHC’s earnings report and conference call on May 12 will hinge on two critical questions:1. Can management demonstrate margin improvement? A narrower Q1 loss and updated cost-reduction plans could validate the $6.50 price target.2. Is revenue growth sustainable? Sequential revenue gains are positive, but analysts will look for visibility into 2025’s full-year guidance, including contract wins or new service expansions.

With QRHC’s stock trading near its 50-day moving average ($2.83) and well below its 200-day average ($5.15), the upcoming report offers a pivotal moment. If the company exceeds EPS estimates or provides strong margin guidance, it could catalyze a rebound toward consensus targets. Conversely, another miss or lack of strategic clarity could reinforce skepticism about its path to profitability.

Conclusion: QRHC’s Turning Point

QRHC’s Q1 results are a microcosm of its broader challenge: balancing growth in sustainable waste management with profit discipline. While its $6.50 price target implies significant upside, investors must weigh the company’s operational track record against its niche ESG positioning. With a P/E/G ratio suggesting undervaluation and insider activity signaling confidence, the stock could reward patient investors—if Q1 delivers a clear path to margin recovery.

The numbers tell the story: a $0.05 EPS loss is a small win, but QRHC needs to prove it can scale profitability. If management can outline a clear roadmap, this could be the quarter where the tide turns. The next 48 hours will reveal whether QRHC’s strategy is more than just wishful recycling.