Energy Recovery (ERII) AI Stock Analysis

• Market Cap: $834.77M
• Dividend Yield: N/A
• Average Volume (3M): 485.33K
• Price to Earnings (P/E): 36.5
• Beta (1Y): 1.35
• Revenue Growth: 12.93%
• EPS Growth: 7.08%
• Country: US
• Employees: 254
• Sector: Industrials
• Sector Strength: 61
• Industry: Industrial - Pollution & Treatment Controls
• EPS (TTM): 0.40
• Shares Outstanding: 54,955,303
• 10 Day Avg. Volume: 474,790
• 30 Day Avg. Volume: 485,328
• PEG Ratio: 5.16
• Price to Book (P/B): N/A
• Price to Sales (P/S): 6.11
• Price to Cash Flow (P/CF): 24.70
• P/FCF Ratio: 24.70
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $22.00
• Price Target Upside: 50.68% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 1

Energy Recovery's strong financial foundation and operational efficiency are key strengths, supported by a robust balance sheet and stable cash flows. Technical indicators suggest positive momentum, although valuation appears high. The recent earnings call provided positive guidance, bolstered by strategic initiatives such as share buybacks. The score reflects strong potential tempered by high valuation and profitability concerns.

Energy Recovery Business Overview & Revenue Model

Company Description

Energy Recovery, Inc., together with its subsidiaries, designs, manufactures, and sells various solutions for the seawater reverse osmosis desalination and industrial wastewater treatment industries worldwide. The company operates through Water and Emerging Technologies segments. It offers a suite of products, including energy recovery devices, and high-pressure feed and recirculation pumps; hydraulic turbochargers and boosters; and spare parts, as well as repair, field, and commissioning services. The company also offers a solution to reduce energy consumption in natural gas processing and in refrigeration systems that use carbon dioxide. It provides its products under the ERI, Ultra PX, PX, Pressure Exchanger, PX Pressure Exchanger, PX PowerTrain, VorTeq, IsoBoost, AT, and AquaBold names to large engineering, procurement, and construction firms; end-users and industry consultants; original equipment manufacturers; and aftermarket customers. The company was incorporated in 1992 and is headquartered in San Leandro, California.

How the Company Makes Money

Energy Recovery generates revenue through the sale and licensing of its proprietary technologies and products, primarily the pressure exchanger devices. These devices are used in various sectors, with a significant portion of revenue stemming from the water desalination industry, where the technology helps in reducing the energy costs associated with reverse osmosis processes. The company also earns from the oil & gas sector by providing solutions that optimize hydraulic fracturing operations. Additionally, Energy Recovery engages in research and development partnerships and service agreements, which contribute to its revenue streams by enhancing product adoption and customer retention. The company’s focus on energy efficiency and sustainability aligns with global trends towards reduced energy consumption, further bolstering its market position.

Energy Recovery Financial Statement Overview

Summary

Energy Recovery shows robust revenue growth and operational efficiency, although profitability has been impacted, as evidenced by the net income drop. The balance sheet remains strong, with low leverage and high equity, providing a solid foundation for future growth. Cash flows are stable, supporting operations despite lower operating cash flow. Overall, the company is well-positioned but should focus on improving net profitability.

Income Statement

Energy Recovery has demonstrated strong revenue growth of 12.44% over the past year. The gross profit margin is robust at 67.16%, indicating effective cost management. However, the net profit margin has dropped to 0%, which is concerning despite strong EBIT and EBITDA margins of 46.74% and 46.74%, respectively. The company has shown substantial growth in EBIT, indicating operational efficiency.

Balance Sheet

The company's balance sheet is solid, with a low debt-to-equity ratio of 0.05, reflecting conservative leverage. ROE is not calculable due to zero net income, but the equity ratio is high at 86.51%, demonstrating a strong equity position. The company maintains a healthy cash reserve, though a decrease compared to the previous year.

Cash Flow

Operating cash flow decreased by 21.20%, but free cash flow remains positive, indicating continued ability to fund operations. The free cash flow to net income ratio is not applicable due to zero net income. While free cash flow has slightly decreased, the company still maintains efficient cash utilization.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
144.31M	128.35M	125.59M	103.90M	118.99M
	Gross Profit
96.92M	87.08M	87.36M	71.23M	90.74M
	EBIT
67.44M	19.05M	18.53M	13.83M	31.29M
	EBITDA
28.02M	24.80M	31.13M	19.77M	38.92M
	Net Income Common Stockholders
23.05M	21.50M	24.05M	14.27M	26.39M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
78.02M	108.54M	92.89M	105.69M	114.70M
	Total Assets
242.79M	252.97M	217.04M	213.69M	204.31M
	Total Debt
11.32M	13.28M	16.48M	16.44M	17.69M
	Net Debt
-18.31M	-54.82M	-76.41M	-57.91M	-76.57M
	Total Liabilities
32.78M	33.17M	31.70M	34.91M	32.69M
	Stockholders Equity
210.01M	219.81M	185.34M	178.78M	171.62M
Cash Flow		Free Cash Flow
19.22M	23.49M	9.50M	6.85M	10.09M
	Operating Cash Flow
20.52M	26.05M	12.63M	13.53M	16.87M
	Investing Cash Flow
-15.65M	-19.11M	-6.95M	-20.56M	46.60M
	Financing Cash Flow
-43.28M	4.79M	-23.67M	-12.79M	4.37M

Energy Recovery Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 14.60
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ERII, the sentiment is Negative. The current price of 14.6 is below the 20-day moving average (MA) of 15.76, below the 50-day MA of 15.40, and below the 200-day MA of 15.95, indicating a bearish trend. The MACD of 0.20 indicates Positive momentum. The RSI at 49.05 is Neutral, neither overbought nor oversold. The STOCH value of 26.48 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ERII.

Energy Recovery Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ERII	76 Outperform	$834.77M	36.53	10.73%	―	12.93%	7.08%
Sector *	62 Neutral	$7.68B	13.06	3.21%	3.34%	3.62%	-14.40%
CECO	61 Neutral	$723.94M	55.96	5.39%	―	2.40%	-0.38%
ARQ	57 Neutral	$155.87M	―	-2.58%	―	9.86%	72.73%
FTEK	55 Neutral	$29.63M	―	-4.54%	―	-7.19%	-24.85%
PCT	34 Underperform	$1.17B	―	-96.27%	―	―	-180.10%
SCWO	33 Underperform	$40.48M	―		―	―	―

Energy Recovery Corporate Events

Energy Recovery Appoints New Chief Technology Officer

On February 26, 2025, Energy Recovery, Inc. announced the appointment of Dr. Ram Ramanan as the new Chief Technology Officer, effective March 3, 2025, succeeding Dr. Farshad Ghasripoor, who will retire but remain as an executive advisor until October 2025. Dr. Ramanan brings over 30 years of engineering leadership experience and will focus on advancing the company’s strategic vision for growth. Additionally, David Kim-Hak was promoted to Vice President, Wastewater, a role aimed at accelerating growth in municipal and industrial wastewater treatment. These appointments underscore Energy Recovery’s commitment to technical, operational, and cultural excellence, positioning the company for sustained growth.