Energy Recovery (ERII) AI Stock Analysis

• Market Cap: $757.50M
• Dividend Yield: N/A
• Average Volume (3M): 377.51K
• Price to Earnings (P/E): 42.0
• Beta (1Y): 1.31
• Revenue Growth: 0.10%
• EPS Growth: 1.50%
• Country: US
• Employees: 254
• Sector: Industrials
• Sector Strength: 72
• Industry: Industrial - Pollution & Treatment Controls
• EPS (TTM): 0.07
• Shares Outstanding: 52,972,095
• 10 Day Avg. Volume: 270,286
• 30 Day Avg. Volume: 377,515
• PEG Ratio: 6.93
• Price to Book (P/B): 4.00
• Price to Sales (P/S): 5.80
• P/FCF Ratio: 43.75
• Enterprise Value/Market Cap: 1.01
• Enterprise Value/Revenue: 5.65
• Enterprise Value/Gross Profit: 8.48
• Enterprise Value/Ebitda: 27.48
• 1Y Price Target: $19.50
• Price Target Upside: 36.36% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2
• EPS Forecast (FY): 0.71
• Revenue Forecast (FY): $164.55M

• Rating: 68 Neutral
• Price Target: $16.00 ▲(11.89% Upside)

Energy Recovery's overall stock score reflects solid financial performance and a positive outlook from the latest earnings call, despite technical indicators suggesting short-term bearish momentum. The high P/E ratio indicates growth expectations, but the lack of a dividend yield may deter income-focused investors. The company's strategic focus on cost control and growth in wastewater and CO2 initiatives supports long-term confidence.

Positive Factors

Revenue Growth

Robust revenue growth indicates strong demand for ERII's products, enhancing market position and supporting long-term profitability.

Cost Management

Effective cost management allows ERII to maintain profitability while investing in growth areas, ensuring sustainable margins.

Balance Sheet Health

A strong balance sheet with low leverage provides financial flexibility, reducing risk and supporting strategic initiatives.

Negative Factors

CO2 Commercialization Delays

Delays in CO2 commercialization could hinder growth in this segment, affecting future revenue streams and diversification efforts.

Free Cash Flow Decline

A decline in free cash flow may limit ERII's ability to invest in growth opportunities or manage debt, impacting long-term financial health.

Uncertain Data Center Opportunities

Uncertainty in data center opportunities could slow diversification efforts, limiting growth potential in this emerging market.

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

Energy Recovery demonstrates solid financial health with strong margins and a robust balance sheet. While revenue growth has slowed, the company maintains efficient operations and a conservative leverage profile. Cash flow generation remains stable, though there are signs of pressure on free cash flow growth. Overall, the company is well-positioned but should focus on revitalizing revenue growth and enhancing profitability.

Income Statement

Energy Recovery's income statement shows a strong gross profit margin of 66.7% for TTM, indicating efficient cost management. However, the net profit margin has decreased to 11.6% from 15.9% in the previous year, reflecting reduced profitability. The revenue growth rate is negative at -4.7% TTM, suggesting a decline in sales compared to the previous period. Despite these challenges, the company maintains a healthy EBIT margin of 13.7% and a robust EBITDA margin of 26.0%.

Balance Sheet

The balance sheet is solid with a low debt-to-equity ratio of 0.055, indicating conservative leverage. Return on equity is at 8.1% TTM, which is a decline from previous years but still reflects decent profitability. The equity ratio stands at 86.3%, showcasing a strong equity base relative to total assets, which enhances financial stability.

Cash Flow

Cash flow analysis reveals a slight decline in free cash flow growth at -1.5% TTM, indicating potential challenges in generating cash. However, the operating cash flow to net income ratio is strong at 0.97, suggesting efficient cash generation relative to earnings. The free cash flow to net income ratio is also healthy at 0.96, reflecting good cash conversion.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	135.19M	144.95M	128.35M	125.59M	103.90M	92.09M
Gross Profit	90.09M	96.93M	87.08M	87.36M	71.23M	63.84M
EBITDA	27.80M	28.02M	24.80M	31.13M	19.77M	38.92M
Net Income	19.52M	23.05M	21.50M	24.05M	14.27M	26.39M
Balance Sheet
Total Assets	209.65M	242.79M	252.97M	217.04M	213.69M	204.31M
Cash, Cash Equivalents and Short-Term Investments	70.38M	78.02M	108.54M	89.83M	105.69M	114.70M
Total Debt	10.00M	11.32M	13.28M	14.88M	16.44M	17.69M
Total Liabilities	28.81M	32.78M	33.17M	31.70M	34.91M	32.69M
Stockholders Equity	180.83M	210.01M	219.81M	185.34M	178.78M	171.62M
Cash Flow
Free Cash Flow	19.88M	19.22M	23.49M	9.50M	6.85M	10.09M
Operating Cash Flow	20.65M	20.52M	26.05M	12.63M	13.53M	16.87M
Investing Cash Flow	43.53M	-15.65M	-19.11M	-6.95M	-20.56M	46.60M
Financing Cash Flow	-80.50M	-43.28M	4.79M	-23.67M	-12.79M	4.37M

Energy Recovery Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 14.30
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ERII, the sentiment is Positive. The current price of 14.3 is above the 20-day moving average (MA) of 14.07, above the 50-day MA of 14.28, and above the 200-day MA of 14.27, indicating a bullish trend. The MACD of -0.03 indicates Negative momentum. The RSI at 51.11 is Neutral, neither overbought nor oversold. The STOCH value of 63.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ERII.

Energy Recovery Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CECO	75 Outperform	$2.36B	47.36	18.85%	―	29.86%	331.33%
ERII	68 Neutral	$757.50M	42.02	9.41%	―	0.10%	1.50%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
FTEK	54 Neutral	$49.72M	-15.71	-7.10%	―	-5.66%	-397.46%
CLIR	48 Neutral	$42.09M	-6.50	-53.13%	―	-49.70%	-2.72%
ARQ	45 Neutral	$154.98M	-38.29	-1.80%	―	7.20%	-2951.61%
LIQT	45 Neutral	$17.47M	-1.74	-73.79%	―	10.97%	44.99%