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Energy Recovery
(NASDAQ:ERII)
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Rating:71Outperform
Price Target:
$10.00
▲(18.76% Upside)
Action:Upgraded
Date:08/07/26
ERII scores well on financial quality (high margins, very low leverage, and exceptional cash generation), which is the main support for the rating. Offsetting factors are weaker longer-term technical trend and only moderate valuation support, while the latest earnings call was mixed due to geopolitical-driven project delays and lack of 2026 guidance despite strong longer-term backlog and pipeline.
Positive Factors
High margins & cash generation
Sustained high gross and operating margins combined with exceptional operating and free cash flow conversion provide durable internal funding. This supports reinvestment in R&D, modest recurring capex, and resilience through project timing variability, preserving long-term profitability and optionality.
Negative Factors
Recent revenue decline
A material top-line contraction raises durability concerns: lower revenue can reduce operating leverage, make fixed-cost absorption harder, and create earnings volatility. Sustained recovery in project awards and OEM demand is required to maintain current margin levels and returns.
Read all positive and negative factors
Positive Factors
Negative Factors
High margins & cash generation
Sustained high gross and operating margins combined with exceptional operating and free cash flow conversion provide durable internal funding. This supports reinvestment in R&D, modest recurring capex, and resilience through project timing variability, preserving long-term profitability and optionality.
Read all positive factors
Energy Recovery Key Performance Indicators (KPIs)
Any
Revenue by Segment
Highlights revenue from different business units, indicating which segments are driving growth and where the company might focus future efforts.
Highlights revenue from different business units, indicating which segments are driving growth and where the company might focus future efforts.
Data provided by:
The Fly
The FlyEnergy Recovery (ERII) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$443.07M
Dividend YieldN/A
Average Volume (3M)943.88K
Price to Earnings (P/E)27.3
Beta (1Y)1.32
Revenue Growth-14.95%
EPS Growth-31.61%
CountryUS
Employees230
SectorIndustrials
Sector Strength72
IndustryIndustrial - Pollution & Treatment Controls
Share Statistics
EPS (TTM)0.29
Shares Outstanding51,044,876
10 Day Avg. Volume632,811
30 Day Avg. Volume943,878
Financial Highlights & Ratios
PEG Ratio4.18
Price to Book (P/B)3.52
Price to Sales (P/S)5.39
P/FCF Ratio41.62
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$10.00Price Target Upside18.76% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)>-0.01
Revenue Forecast (FY)$90.58M
Energy Recovery Business Overview & Revenue Model
Company Description
Energy Recovery, Inc. (ERII) is a global technology firm that engineers, manufactures, and distributes cutting-edge solutions predominantly for the seawater reverse osmosis (SWRO) desalination and industrial wastewater treatment industries. The co...
How the Company Makes Money
Energy Recovery makes money primarily by selling energy-recovery devices and related solutions used in reverse osmosis desalination systems. Its main revenue stream is product revenue from pressure exchanger (PX) equipment supplied to desalination...
Energy Recovery Earnings Call Summary
Earnings Call Date:Aug 05, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Nov 04, 2026
Earnings Call Sentiment Neutral
The call presents a mixed picture: management highlights strong long-term fundamentals (a multi-year MPD pipeline, product launches like the PX Q650, demonstrated energy savings, modest capex needs, and operational discipline) but also emphasizes significant near-term headwinds from geopolitical conflict that have caused formalized project delays, reduced visibility, softer wastewater results, and an inability to provide 2026 guidance. Margin benefits from the new Saudi facility and product launches are expected but will accrue gradually rather than immediately.Positive Updates
Strong Long-Term Pipeline and Forward Visibility
Management describes the MPD pipeline as "uniquely strong" with forward visibility extending up to 5 years and named projects and customers identified; long-term market structural growth characterized as high single digits.
Negative Updates
Geopolitical Conflict Causing Project Delays and Visibility Loss
Ongoing Iran conflict has materially clouded near-term visibility; management reports formalized delays on some Middle East megaprojects driven by financing challenges, increased risk premiums, procurement and logistics issues.
Read all updates
Q2-2026 Updates
Positive
Negative
Strong Long-Term Pipeline and Forward Visibility
Management describes the MPD pipeline as "uniquely strong" with forward visibility extending up to 5 years and named projects and customers identified; long-term market structural growth characterized as high single digits.
Read all positive updates
Company Guidance
Management provided limited near‑term numeric guidance but shared several quantifiable points: they see durable structural end‑market growth in the high single digits, a strong pipeline with visibility extending up to five years and a disclosed backlog of $27 million (with growth expected to reappear in 2027 and beyond); reiterated 2026 total CapEx guidance of $3–6 million (with maintenance CapEx below that level) and described the Saudi manufacturing site as a leased, low‑incremental‑CapEx build that should drive gradual margin improvement as it ramps to planned run‑rate production in 2027–2028; noted PX low‑pressure energy savings of roughly 23%–25% in real‑world applications and that their MPD equipment typically represents about 1%–2% of a project’s capital value, while OEM and aftermarket businesses are expected to remain resilient for the full year despite H1 softness.Energy Recovery Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
88
Very Positive
Cash Flow
90
Very Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 120.29M | 134.70M | 144.95M | 128.35M | 125.59M | 103.90M |
| Gross Profit | 78.66M | 87.78M | 96.93M | 87.08M | 87.36M | 71.23M |
| EBITDA | 27.67M | 31.36M | 28.02M | 28.45M | 32.37M | 19.94M |
| Net Income | 15.34M | 22.96M | 23.05M | 21.50M | 24.05M | 14.27M |
Balance Sheet | ||||||
| Total Assets | 197.74M | 231.51M | 242.79M | 252.97M | 217.04M | 213.69M |
| Cash, Cash Equivalents and Short-Term Investments | 93.06M | 75.25M | 78.02M | 108.54M | 89.83M | 105.69M |
| Total Debt | 8.23M | 9.43M | 11.32M | 13.28M | 14.88M | 16.44M |
| Total Liabilities | 25.26M | 25.32M | 32.78M | 33.17M | 31.70M | 34.91M |
| Stockholders Equity | 172.48M | 206.19M | 210.01M | 219.81M | 185.34M | 178.78M |
Cash Flow | ||||||
| Free Cash Flow | 38.60M | 17.44M | 19.22M | 23.49M | 9.50M | 6.85M |
| Operating Cash Flow | 41.29M | 18.77M | 20.52M | 26.05M | 12.63M | 13.53M |
| Investing Cash Flow | -2.56M | 33.98M | -15.65M | -19.11M | -6.95M | -20.56M |
| Financing Cash Flow | -34.49M | -34.53M | -43.28M | 4.79M | -23.67M | -12.79M |
Energy Recovery Technical Analysis
Negative
8.42
Price Trends
8.58
Negative
9.30
Negative
11.80
Negative
Market Momentum
-0.04
Positive
37.72
Neutral
41.19
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 8.42 is below the 20-day moving average (MA) of 8.58, below the 50-day MA of 8.58, and below the 200-day MA of 11.80, indicating a bearish trend. The MACD of -0.04 indicates Positive momentum. The RSI at 37.72 is Neutral, neither overbought nor oversold. The STOCH value of 41.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ERII.
Energy Recovery Risk Analysis
Energy Recovery disclosed 2 risk factors in its most recent earnings report. Energy Recovery reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Energy Recovery Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
71 Outperform | $443.07M | 27.28 | 8.25% | ― | -14.95% | -31.61% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
53 Neutral | $4.14B | -120.97 | 5.54% | ― | 32.11% | -71.47% | |
53 Neutral | $43.70M | -12.28 | -8.88% | ― | 8.89% | -6.47% | |
48 Neutral | $89.29M | -1.65 | -27.88% | ― | 6.71% | -3120.50% | |
48 Neutral | $23.65M | -3.89 | -61.23% | ― | 73.54% | 17.08% | |
43 Neutral | $19.08M | -0.77 | -79.34% | ― | 6.94% | 38.10% |
* Industrials Sector Average
ERII
Energy Recovery
7.99
-6.31
-44.13%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.