Waste and recycling services provider Quest Resource (NASDAQ: QRHC) fell short of the market’s revenue expectations in Q2 CY2025, with sales falling 18.6% year on year to $59.54 million. Its non-GAAP loss of $0.04 per share was significantly below analysts’ consensus estimates.

Is now the time to buy Quest Resource? Find out by accessing our full research report, it’s free.

Perry W. Moss, Quest’s Chief Executive Officer, said, “I believe a culture of performance and accountability is critical to the success of an organization. We are fundamentally changing Quest’s culture, and we are already seeing positive results. Our team is embracing this data and KPI driven philosophy. Our Operational Excellence Initiatives are beginning to improve cash generation, improve efficiency, and reduce operational variability. In addition, we are strengthening vendor relationships and increasing employee satisfaction while maintaining high standards for client service; all of which will drive long-term shareholder value.

Company Overview

Recycling corporate waste to help companies be more sustainable, Quest Resource (NASDAQ: QRHC) is a provider of waste and recycling services.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Quest Resource grew its sales at an incredible 23.5% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Quest Resource’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.4% over the last two years.

This quarter, Quest Resource missed Wall Street’s estimates and reported a rather uninspiring 18.6% year-on-year revenue decline, generating $59.54 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 13.3% over the next 12 months, an improvement versus the last two years. This projection is healthy and implies its newer products and services will catalyze better top-line performance.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

Operating Margin

Quest Resource was profitable over the last five years but held back by its large cost base. Its average operating margin of 1.3% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Quest Resource’s operating margin decreased by 5.6 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Quest Resource’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Quest Resource’s breakeven margin was down 1.8 percentage points year on year. Since Quest Resource’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Quest Resource, its EPS declined by 49.6% annually over the last five years while its revenue grew by 23.5%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Quest Resource’s earnings can give us a better understanding of its performance. As we mentioned earlier, Quest Resource’s operating margin declined by 5.6 percentage points over the last five years. Its share count also grew by 35.3%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Quest Resource, its two-year annual EPS declines of 118% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, Quest Resource reported adjusted EPS at negative $0.04, down from $0.03 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Quest Resource’s full-year EPS of negative $0.33 will reach break even.

Key Takeaways from Quest Resource’s Q2 Results

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $1.96 immediately after reporting.

Is Quest Resource an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.