Perma-Fix (PESI)

Environmental waste treatment and services provider Perma-Fix (NASDAQ:PESI) fell short of the market’s revenue expectations in Q2 CY2025 as sales rose 4.3% year on year to $14.59 million. Its GAAP loss of $0.15 per share was in line with analysts’ consensus estimates.

Company Overview

Tackling hazardous waste challenges since 1990, Perma-Fix (NASDAQ:PESI) provides environmental waste treatment services.

Waste management companies can possess licenses permitting them to handle hazardous materials. Furthermore, many services are performed through contracts and statutorily mandated, non-discretionary, or recurring, leading to more predictable revenue streams. However, regulation can be a headwind, rendering existing services obsolete or forcing companies to invest precious capital to comply with new, more environmentally-friendly rules. Lastly, waste management companies are at the whim of economic cycles. Interest rates, for example, can greatly impact industrial production or commercial projects that create waste and byproducts.

Competitors of Perma-Fix include US Ecology (NASDAQ:ECOL), Clean Harbors (NYSE:CLH), and Heritage-Crystal Clean (NASDAQ:HCCI).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Perma-Fix’s demand was weak over the last five years as its sales fell at a 8.1% annual rate. This was below our standards and is a sign of poor business quality.

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. Perma-Fix’s recent performance shows its demand remained suppressed as its revenue has declined by 13.6% annually over the last two years.

This quarter, Perma-Fix’s revenue grew by 4.3% year on year to $14.59 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 65.8% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will catalyze better top-line performance.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

Perma-Fix has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 11.3% gross margin over the last five years. Said differently, Perma-Fix had to pay a chunky $88.66 to its suppliers for every $100 in revenue.

Perma-Fix’s gross profit margin came in at 10.6% this quarter, up 19.9 percentage points year on year. On a wider time horizon, however, Perma-Fix’s full-year margin has been trending down over the past 12 months, decreasing by 2.7 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Perma-Fix’s high expenses have contributed to an average operating margin of negative 8.5% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, Perma-Fix’s operating margin decreased by 19.6 percentage points over the last five years. Perma-Fix’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, Perma-Fix generated a negative 19.8% operating margin. The company's consistent lack of profits raise a flag.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Perma-Fix’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 5.9%, meaning it lit $5.94 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Perma-Fix’s margin dropped by 26.7 percentage points during that time. 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.

Companies with more cash than debt have lower bankruptcy risk.

Perma-Fix is a well-capitalized company with $22.59 million of cash and no debt. This position is 11% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $11.20 immediately following the results.

Updated: November 7, 2025 at 10:20 PM EST

Before deciding whether to buy Perma-Fix or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Perma-Fix doesn’t pass our quality test. To kick things off, its revenue has declined over the last five years. And while its projected EPS for the next year implies the company will start generating shareholder value, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Perma-Fix’s forward price-to-sales ratio is 2.9x. The market typically values companies like Perma-Fix based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy.

Wall Street analysts have a consensus one-year price target of $18 on the company (compared to the current share price of $12.87).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.