company background image
ERII

Energy Recovery NasdaqGS:ERII Stock Report

Last Price

US$23.77

Market Cap

US$1.3b

7D

4.3%

1Y

27.9%

Updated

18 Aug, 2022

Data

Company Financials +
ERII fundamental analysis
Snowflake Score
Valuation0/6
Future Growth5/6
Past Performance2/6
Financial Health6/6
Dividends0/6

ERII Stock Overview

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.

Energy Recovery Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Energy Recovery
Historical stock prices
Current Share PriceUS$23.77
52 Week HighUS$24.99
52 Week LowUS$16.92
Beta1.24
1 Month Change19.03%
3 Month Change30.39%
1 Year Change27.86%
3 Year Change158.93%
5 Year Change271.99%
Change since IPO141.81%

Recent News & Updates

Aug 08

ERII: Investors Cheer IRA Bill And VorTeq's Exit

Finally, more than six years after the deal with Schlumberger was signed, Energy Recovery has pulled the plug on its ill-fated VorTeq commercialization effort. This is great news for ERII shareholders. The company can now focus on its core bread-n-butter: The global salt water reverse osmosis ("SWRO") market. In addition, and as I reported previously, a market that has superior odds of success as compared to VorTeq, has emerged: CO2 Refrigeration. Meantime, while ERII's current valuation appears to be quite lofty, its core SWRO business will set all-time records this year. After years of investment, multiple CEOs, and never realized promises, Energy Recovery (ERII) finally pulled the plug on VorTeq - the system that was supposed to revolutionize shale fracking (but never did). This is great news for ERII investors because it will enable the company to focus on its core strength, SWRO, and a new emerging market that actually has excellent potential: CO2 refrigeration. Meantime, the stock has been strong of late (see graphic below) due to Democrats passing the Schumer/Manchin bill, the so-called IRA Act. That's because the IRA Act is the United States' largest investment ever to address global warming and to support clean-energy supply chains. Considering ERII is a leading ESG company, that's a bullish tailwind. Meantime, and despite a tepid Q2, ERII has a heavily loaded back-end of the year and is on track to generate record revenue of $130 million this year (+25% yoy). ERII data by YCharts Investment Thesis As noted in my previous Seeking Alpha article on ERII, there's a global water crisis. And for those Americans who think it doesn't apply to the United States, they couldn't be more wrong. Indeed, two of America's largest storage reservoirs - Lake Mead and Lake Powell - are at record lows. The situation is so dire that one proposal is to pay Mexico to build a desalination plant in order to keep more of the Colorado River's water in the United States. No matter how you look at the global water crisis (see graphic below), it plays right into ERII's primary business: salt-water reverse osmosis using its patented "PX" device technology. World Economic Forum Earnings From a financial perspective, I readily admit that ERII's Q2 EPS report was less than inspiring. Revenue of $20.3 million was flat as compared to the year-earlier period. The company swung to a net loss of $0.04/share as compared to a profit of $0.02/share in Q2 of last year. However, there was plenty of good news: CEO and Chairman Robert Mao finally announced the company would finally pull-the-plug on its efforts to commercialize VorTeq. On July 1, 2022 the company completed its March 2021 share repurchase authorization by purchasing 1 million shares during the quarter for $18.6 million (an average of $18.6/share). Unlike many companies that execute share buyback programs, ERII's fully diluted share-count actually went down yoy: 56.2 million shares as compared to 59.0 million shares (a reduction of ~4.8%). The company ended Q2 with no-debt and cash and investments of $86.5 million ($1.53/share). The company also reported that IR Magazine awarded Energy Recovery the winner of the "Best ESG Reporting (small to mid-cap company)" and "Best ESG Communications" for its 2020 ESG Report and active engagement with the investment community on that topic. Indeed, ERII's MSCI ESG rating was upgraded to "AA" in April. That's ERII's second upgrade over the past two years. Going Forward The good news continued on a go-forward basis. ERRI reiterated its full-year revenue guidance of $130 million - that would be up 25% on a year-over-year basis and is the result of a heavily loaded back-end of the year due to the timing of big mega-project shipments. In addition, on the Q2 conference call, CFO Joshua Ballard reported that "Total OEM revenue for the year includes $1.6 million in industrial wastewater sales." In my opinion, and as I reported in previous articles on ERII, industrial wastewater also has much better potential than VorTeq because it's much closer use-case as compared to the company's core competency in using PX devices for SWRO. Based on its order-flow and market research, ERII is quite bullish on its future revenue growth potential: Energy Recovery However, long-time shareholders know that ERII management has been famous over the years for making over-optimistic revenue projections (often based on mega-project shipments and assumptions of VorTeq success) that never materialized. The good news now is that VorTeq has been taken out of the equation - but has replaced by expectations of CO2 refrigeration growth, and to a lesser extent, industrial wastewater. On that front, Chairman Mao (sorry, I couldn't help myself...) also reported great news on ERII's efforts to diversify into CO2 refrigeration, a new and exciting business: In a key milestone for our CO 2 business, we successfully commissioned our PX G1300 with our partner in a new supermarket in southern Europe in late June and are very encouraged by its strong initial performance. We also entered into a second joint-development agreement with a U.S. refrigeration rack manufacturer in early July and are continuing discussions with several others. This new partnership should lead to a second supermarket installation in the U.S. and is another important milestone as we prove the value of our PX technology to help the refrigeration industry transition to more climate-friendly, natural refrigerants. ERII projects that CO2 refrigeration will represent a $1 billion annual TAM by 2030 due to the need (indeed, regulation enforced in some regions) to reduce the hydro-fluorocarbon ("HFC") emissions: Energy Recovery Source: June Presentation Risks In my opinion, the risks of investing in ERII have dropped considerably with the news that the company will no-longer be throwing good-money after bad on the ill-fated VorTeq initiative. As I have been saying for years in my Seeking Alpha articles on ERII, this move was long overdue.

Jul 25
What Does Energy Recovery, Inc.'s (NASDAQ:ERII) Share Price Indicate?

What Does Energy Recovery, Inc.'s (NASDAQ:ERII) Share Price Indicate?

Energy Recovery, Inc. ( NASDAQ:ERII ), might not be a large cap stock, but it saw a decent share price growth in the...

Shareholder Returns

ERIIUS MachineryUS Market
7D4.3%1.4%1.4%
1Y27.9%-6.9%-8.4%

Return vs Industry: ERII exceeded the US Machinery industry which returned -8.8% over the past year.

Return vs Market: ERII exceeded the US Market which returned -9% over the past year.

Price Volatility

Is ERII's price volatile compared to industry and market?
ERII volatility
ERII Average Weekly Movement4.9%
Machinery Industry Average Movement5.8%
Market Average Movement7.6%
10% most volatile stocks in US Market17.1%
10% least volatile stocks in US Market3.1%

Stable Share Price: ERII is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: ERII's weekly volatility (5%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
1992222Robert, Bob Maohttps://www.energyrecovery.com

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.

Energy Recovery Fundamentals Summary

How do Energy Recovery's earnings and revenue compare to its market cap?
ERII fundamental statistics
Market CapUS$1.33b
Earnings (TTM)US$11.87m
Revenue (TTM)US$107.20m

111.7x

P/E Ratio

12.4x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
ERII income statement (TTM)
RevenueUS$107.20m
Cost of RevenueUS$32.93m
Gross ProfitUS$74.27m
Other ExpensesUS$62.40m
EarningsUS$11.87m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)0.21
Gross Margin69.28%
Net Profit Margin11.07%
Debt/Equity Ratio0%

How did ERII perform over the long term?

See historical performance and comparison
We’ve recently updated our valuation analysis.

Valuation

Is ERII undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

0/6

Valuation Score 0/6

  • Price-To-Earnings vs Peers

  • Price-To-Earnings vs Industry

  • Price-To-Earnings vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for ERII?

Other financial metrics that can be useful for relative valuation.

ERII key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue11.7x
Enterprise Value/EBITDA64.1x
PEG Ratio2x

Price to Earnings Ratio vs Peers

How does ERII's PE Ratio compare to its peers?

ERII PE Ratio vs Peers
The above table shows the PE ratio for ERII vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average50.2x
OFLX Omega Flex
49.1xn/aUS$1.2b
SXI Standex International
19.5x14.0%US$1.2b
PRLB Proto Labs
51.1x41.5%US$1.2b
EPAC Enerpac Tool Group
81.1x53.0%US$1.3b
ERII Energy Recovery
111.7x55.1%US$1.3b

Price-To-Earnings vs Peers: ERII is expensive based on its Price-To-Earnings Ratio (111.7x) compared to the peer average (50.2x).


Price to Earnings Ratio vs Industry

How does ERII's PE Ratio compare vs other companies in the US Machinery Industry?

Price-To-Earnings vs Industry: ERII is expensive based on its Price-To-Earnings Ratio (111.7x) compared to the US Machinery industry average (22.1x)


Price to Earnings Ratio vs Fair Ratio

What is ERII's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

ERII PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio111.7x
Fair PE Ratio42.6x

Price-To-Earnings vs Fair Ratio: ERII is expensive based on its Price-To-Earnings Ratio (111.7x) compared to the estimated Fair Price-To-Earnings Ratio (42.6x).


Share Price vs Fair Value

What is the Fair Price of ERII when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: ERII ($23.77) is trading above our estimate of fair value ($22.26)

Significantly Below Fair Value: ERII is trading above our estimate of fair value.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.


Discover undervalued companies

Future Growth

How is Energy Recovery forecast to perform in the next 1 to 3 years based on estimates from 3 analysts?

Future Growth Score

5/6

Future Growth Score 5/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


55.1%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ERII's forecast earnings growth (55.1% per year) is above the savings rate (1.9%).

Earnings vs Market: ERII's earnings (55.1% per year) are forecast to grow faster than the US market (14.4% per year).

High Growth Earnings: ERII's earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: ERII's revenue (24.9% per year) is forecast to grow faster than the US market (7.8% per year).

High Growth Revenue: ERII's revenue (24.9% per year) is forecast to grow faster than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: ERII's Return on Equity is forecast to be low in 3 years time (18.8%).


Discover growth companies

Past Performance

How has Energy Recovery performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


0.2%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: ERII has high quality earnings.

Growing Profit Margin: ERII's current net profit margins (11.1%) are lower than last year (16.2%).


Past Earnings Growth Analysis

Earnings Trend: ERII's earnings have grown by 0.2% per year over the past 5 years.

Accelerating Growth: ERII's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: ERII had negative earnings growth (-29.2%) over the past year, making it difficult to compare to the Machinery industry average (9.4%).


Return on Equity

High ROE: ERII's Return on Equity (7.3%) is considered low.


Discover strong past performing companies

Financial Health

How is Energy Recovery's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: ERII's short term assets ($129.1M) exceed its short term liabilities ($15.2M).

Long Term Liabilities: ERII's short term assets ($129.1M) exceed its long term liabilities ($14.4M).


Debt to Equity History and Analysis

Debt Level: ERII is debt free.

Reducing Debt: ERII has no debt compared to 5 years ago when its debt to equity ratio was 0.05%.

Debt Coverage: ERII has no debt, therefore it does not need to be covered by operating cash flow.

Interest Coverage: ERII has no debt, therefore coverage of interest payments is not a concern.


Balance Sheet


Discover healthy companies

Dividend

What is Energy Recovery current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage

Dividend Yield vs Market

Notable Dividend: Unable to evaluate ERII's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate ERII's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.


Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if ERII's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if ERII's dividend payments have been increasing.


Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as ERII has not reported any payouts.


Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

3.8yrs

Average management tenure


CEO

Robert, Bob Mao (78 yo)

2.75yrs

Tenure

US$2,006,933

Compensation

Mr. Yu-Lang Mao, also known as Robert & Bob, serves as the President & Chief Executive Officer of Energy Recovery, Inc. since May 5, 2020. He serves as an Advisor at PAC-LINK Management Corp. Mr. Mao serve...


CEO Compensation Analysis

Compensation vs Market: Robert, Bob's total compensation ($USD2.01M) is below average for companies of similar size in the US market ($USD5.41M).

Compensation vs Earnings: Robert, Bob's compensation has been consistent with company performance over the past year.


Leadership Team

Experienced Management: ERII's management team is considered experienced (3.8 years average tenure).


Board Members

Experienced Board: ERII's board of directors are considered experienced (5.9 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: ERII insiders have only sold shares in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

Energy Recovery, Inc.'s employee growth, exchange listings and data sources


Key Information

  • Name: Energy Recovery, Inc.
  • Ticker: ERII
  • Exchange: NasdaqGS
  • Founded: 1992
  • Industry: Industrial Machinery
  • Sector: Capital Goods
  • Implied Market Cap: US$1.326b
  • Shares outstanding: 55.79m
  • Website: https://www.energyrecovery.com

Number of Employees


Location

  • Energy Recovery, Inc.
  • 1717 Doolittle Drive
  • San Leandro
  • California
  • 94577
  • United States

Listings


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/08/18 00:00
End of Day Share Price2022/08/18 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.