Energy Recovery (ERII) AI Stock Analysis

• Market Cap: $542.02M
• Dividend Yield: N/A
• Average Volume (3M): 288.09K
• Price to Earnings (P/E): 23.6
• Beta (1Y): 1.44
• Revenue Growth: 0.10%
• EPS Growth: 1.50%
• Country: US
• Employees: 254
• Sector: Industrials
• Sector Strength: 72
• Industry: Industrial - Pollution & Treatment Controls
• EPS (TTM): 0.50
• Shares Outstanding: 52,828,667
• 10 Day Avg. Volume: 263,693
• 30 Day Avg. Volume: 288,090
• PEG Ratio: 4.21
• Price to Book (P/B): 3.52
• Price to Sales (P/S): 5.39
• P/FCF Ratio: 41.62
• Enterprise Value/Market Cap: 0.93
• Enterprise Value/Revenue: 3.75
• Enterprise Value/Gross Profit: 5.76
• Enterprise Value/Ebitda: 48.13
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 0.56
• Revenue Forecast (FY): $151.49M

• Rating: 71 Outperform
• Price Target: $18.00 ▲(11.66% Upside)
• Action: Upgraded Date: 02/26/26
• Date: Action: Upgraded 02/26/26

ERII scores well on financial stability and profitability (notably the strong balance sheet and high gross margins) and has supportive technical momentum. The score is held back by expensive valuation (high P/E, no dividend) and mixed near-term fundamentals/growth visibility, including recent revenue/FCF weakening and a longer path to CO2 commercialization despite solid cost control.

Positive Factors

Balance Sheet Strength

Very low leverage and sizeable equity provide durable financial flexibility. This balance sheet strength supports capital allocation through demand swings, funds R&D and project testing without urgent refinancing, and reduces bankruptcy risk during cyclical slowdowns.

High Gross Margins / Pricing Power

Sustained gross margins near 65–70% indicate structural pricing power and differentiated technology. High product-level profitability affords investment in service networks and product development while insulating operating results from moderate cost increases.

Durable Industrial/Wastewater Demand

Improving mega-project execution and a wastewater revenue rebound reflect entrenched demand for energy-reducing RO equipment. Long project cycles, OEM partnerships and recurring service/spare parts create durable, multi-year revenue streams and customer stickiness.

Negative Factors

Revenue and FCF Weakness

A ~36% revenue drop in 2025 and recent free cash flow declines show growth volatility and sensitivity to project timing. Such swings reduce predictability for reinvestment and make multi-quarter planning harder, increasing execution risk for strategic initiatives.

Strategic Setback in CO2 Business

Winding down the CO2 retail initiative and taking material one-time charges signals misallocated prior investments and longer timelines for OEM commercialization. It constrains near-term growth prospects and requires management to reallocate capital to higher-return areas.

Earnings Quality & Consistency

Divergence between solid EBITDA and collapsing net income (to zero in 2025) and uneven cash conversion indicate earnings quality issues. Accounting items, timing or one-offs can mask operational performance and complicate reliable forecasting and ROI assessment.

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 primarily through the sale of its energy recovery devices and systems to companies in the water treatment and industrial sectors. The company earns money through direct sales of its products, which are often accompanied by installation and maintenance services. Additionally, ERII benefits from long-term contracts and recurring revenue streams through ongoing service agreements and spare parts sales. Significant partnerships with major industry players, such as utility companies and engineering firms, enhance its market presence and contribute to its earnings. The continued focus on energy efficiency and sustainability trends also positions ERII to capture growing demand in these sectors.

Energy Recovery Financial Statement Overview

Summary

Financials are anchored by a very strong balance sheet (low leverage, stable equity) and consistently high gross margins. Offsetting this, revenue and free-cash-flow momentum have weakened recently and earnings consistency/quality is a concern given the sharp 2025 revenue decline and uneven conversion.

Income Statement

ERII shows structurally strong profitability with consistently high gross margins (~65–70%) and solid EBITDA margins in most years, indicating good pricing power and operating leverage. However, growth has turned volatile: revenue declined sharply in 2025 (down ~36% after modest growth in 2024), and reported net income fell to zero in 2025 despite strong EBITDA, creating a meaningful earnings-quality and consistency concern versus 2020–2024 when net margins were generally healthy.

Balance Sheet

The balance sheet is a clear strength: leverage is very low with debt-to-equity consistently around ~0.05–0.10 and total debt under $20M across the period, providing flexibility through demand swings. Equity remains large and stable (~$185M–$220M), supporting resilience. The main weakness is that profitability on equity becomes less dependable when earnings soften (notably 2025, when returns effectively drop to zero).

Cash Flow

Cash generation is generally solid with positive operating cash flow and free cash flow every year, and cash conversion has often been strong (free cash flow roughly in line with net income historically). Still, cash flow momentum weakened recently: free cash flow declined in 2024 and again in 2025, and cash flow coverage of earnings has been uneven year-to-year, suggesting sensitivity to working capital and/or project timing.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	134.70M	144.95M	128.35M	125.59M	103.90M
Gross Profit	87.78M	96.93M	87.08M	87.36M	71.23M
EBITDA	28.32M	28.02M	24.80M	31.13M	19.77M
Net Income	22.96M	23.05M	21.50M	24.05M	14.27M
Balance Sheet
Total Assets	231.51M	242.79M	252.97M	217.04M	213.69M
Cash, Cash Equivalents and Short-Term Investments	75.25M	78.02M	108.54M	89.83M	105.69M
Total Debt	9.43M	11.32M	13.28M	14.88M	16.44M
Total Liabilities	25.32M	32.78M	33.17M	31.70M	34.91M
Stockholders Equity	206.19M	210.01M	219.81M	185.34M	178.78M
Cash Flow
Free Cash Flow	17.44M	19.22M	23.49M	9.50M	6.85M
Operating Cash Flow	18.77M	20.52M	26.05M	12.63M	13.53M
Investing Cash Flow	33.98M	-15.65M	-19.11M	-6.95M	-20.56M
Financing Cash Flow	-34.53M	-43.28M	4.79M	-23.67M	-12.79M

Energy Recovery Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 16.12
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

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 16.12 is above the 20-day moving average (MA) of 14.82, above the 50-day MA of 14.44, and above the 200-day MA of 14.28, indicating a bearish trend. The MACD of -0.69 indicates Positive momentum. The RSI at 19.08 is Positive, neither overbought nor oversold. The STOCH value of 5.40 is Positive, 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	71 Outperform	$542.02M	23.61	9.41%	―	0.10%	1.50%
CECO	67 Neutral	$1.90B	42.44	17.71%	―	29.86%	331.33%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
FTEK	54 Neutral	$46.30M	-15.20	-7.10%	―	-5.66%	-397.46%
LIQT	53 Neutral	$16.31M	-1.85	-73.79%	―	10.97%	44.99%
CLIR	48 Neutral	$30.12M	-4.79	-53.13%	―	-49.70%	-2.72%
ARQ	45 Neutral	$149.43M	-36.92	-1.80%	―	7.20%	-2951.61%

Energy Recovery Corporate Events

Energy Recovery Exits CO2 Grocery Business, Refocuses Strategy

On February 25, 2026, Energy Recovery moved to exit its CO2 retail grocery business within the Emerging Technologies segment, concluding that the initiative would require excessive time, capital and risk to achieve scale, and no longer fit its return criteria. The wind-down, expected to be largely completed by the end of the first quarter of fiscal 2026, will trigger an estimated $4.5 million to $5.5 million in one-time charges, including cash severance and non-cash inventory and goodwill impairments, and is aimed at sharpening strategic focus and maximizing shareholder value.

On the same date, the company reported fourth-quarter 2025 revenue of $66.9 million, essentially flat year-on-year, with gross margin slipping to 67.2% due to product mix and tariffs but operating income rising 22.3% to $31.3 million on sharply lower operating expenses. Net income climbed to $26.9 million in the quarter while full-year 2025 revenue declined 7% to $135 million, and Energy Recovery ended the period with $83.3 million in cash and investments, underscoring solid profitability and liquidity despite softer annual sales.

The most recent analyst rating on (ERII) stock is a Buy with a $23.00 price target. To see the full list of analyst forecasts on Energy Recovery stock, see the ERII Stock Forecast page.