With the stock now trading at book value, Stifel GMP analyst Justin Keywood likes the look of Questor Technology (Questor Technology Stock Quote, Chart, News TSXV:QST), but with major trouble brewing in oil and gas, says there’s going to be a drop in sales, nonetheless. Keywood updated clients on Questor in a report on Friday where he kept his “Buy” rating but decreased his target price from $7.25 to $4.00, representing at press time a projected one-year return of 179 per cent. Calgary-based Questor, which makes high-efficiency waste gas incineration systems for the oil and gas industry, announced its fourth quarter and 2019 year end results on Wednesday, showing record revenue and earnings for the year. The company posted revenue of $30.2 million for 2019 compared to $23.5 million in 2018 and EPS of $0.27 per share compared to $0.26 a year ago. For the Q4, Questor posted a top line of $6.8 million compared to $6.0 million a year ago and EPS of $0.04 per share compared to 2018 Q4’s $0.06 per share. President and CEO Audrey Mascarenhas said in her commentary that the double blow of oversupply of oil from Saudi Arabia and Russia combined with the coronavirus pandemic and its associated reduced global demand for oil have weighed heavily on the sector and on Questor, which is seeing lower demand for its products and services. “Questor’s strong balance sheet with zero debt, our substantial cash reserves and large rental fleet will enable us to plan and strategize during this challenging market cycle and emerge as a stronger company,” said Mascarenhas in a press release. “This strong foundation will enable us to move forward on a series of strategic initiatives and support our exponential growth when the market’s confidence has returned. Questor intends to preserve its cash flow through 2020 and continue to be fiscally responsible, making prudent capital investments during this challenging period,” she said. Keywood called the Q4 results good and pointed to the company’s sales growth of 14 per cent, EBITDA margin at 43 per cent and free cash flow of $3.2 million, which was up 170 per cent year-over-year. But the writing is on the wall, Keywood said, as he estimated QST’s rental fleet to have about a 25 per cent current utilization rate with more declines for rental and sales dropping to 2008/2009 levels. “The oil price crash has put a severe strain on QST’s customers but support could be provided ahead by the government for critical infrastructure,” Keywood wrote. “We also believe that QST will diversify into other industries that are less cyclical and less subject to negative shocks, like the waste processing industry for landfill sites that emit high levels of methane. QST has already sold some of its clean air technology to other industries outside of oil and gas and we believe further diversification will ultimately lead to a more valuable business with higher trading multiples.” At the same time, Keywood pointed out that Questor has navigated negative industry shocks in the past and said, “We see diversification benefits ahead to other industries.” For 2020, Keywood has called for revenue of $15.0 million and EBITDA of $3.3 million, heading back up to $25.0 million and $9.5 million, respectively, in 2021.