| Snowflake Score | |
|---|---|
| Valuation | 0/6 |
| Future Growth | 5/6 |
| Past Performance | 2/6 |
| Financial Health | 6/6 |
| Dividends | 0/6 |
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
| Historical stock prices | |
|---|---|
| Current Share Price | US$23.77 |
| 52 Week High | US$24.99 |
| 52 Week Low | US$16.92 |
| Beta | 1.24 |
| 1 Month Change | 19.03% |
| 3 Month Change | 30.39% |
| 1 Year Change | 27.86% |
| 3 Year Change | 158.93% |
| 5 Year Change | 271.99% |
| Change since IPO | 141.81% |
Recent News & Updates
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.
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
| ERII | US Machinery | US Market | |
|---|---|---|---|
| 7D | 4.3% | 1.4% | 1.4% |
| 1Y | 27.9% | -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
| ERII volatility | |
|---|---|
| ERII Average Weekly Movement | 4.9% |
| Machinery Industry Average Movement | 5.8% |
| Market Average Movement | 7.6% |
| 10% most volatile stocks in US Market | 17.1% |
| 10% least volatile stocks in US Market | 3.1% |
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
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1992 | 222 | Robert, Bob Mao | https://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
| ERII fundamental statistics | |
|---|---|
| Market Cap | US$1.33b |
| Earnings (TTM) | US$11.87m |
| Revenue (TTM) | US$107.20m |
111.7x
P/E Ratio12.4x
P/S RatioIs ERII overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| ERII income statement (TTM) | |
|---|---|
| Revenue | US$107.20m |
| Cost of Revenue | US$32.93m |
| Gross Profit | US$74.27m |
| Other Expenses | US$62.40m |
| Earnings | US$11.87m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 0.21 |
| Gross Margin | 69.28% |
| Net Profit Margin | 11.07% |
| Debt/Equity Ratio | 0% |
How did ERII perform over the long term?
See historical performance and comparisonValuation
Is ERII undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
0/6Valuation 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.
| What is ERII's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$1.33b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 11.7x |
| Enterprise Value/EBITDA | 64.1x |
| PEG Ratio | 2x |
Price to Earnings Ratio vs Peers
How does ERII's PE Ratio compare to its peers?
| ERII PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 50.2x | ||
OFLX Omega Flex | 49.1x | n/a | US$1.2b |
SXI Standex International | 19.5x | 14.0% | US$1.2b |
PRLB Proto Labs | 51.1x | 41.5% | US$1.2b |
EPAC Enerpac Tool Group | 81.1x | 53.0% | US$1.3b |
ERII Energy Recovery | 111.7x | 55.1% | 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.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 111.7x |
| Fair PE Ratio | 42.6x |
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
5/6Future 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
2/6Past 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
6/6Financial 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
0/6Dividend 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
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/08/18 00:00 |
| End of Day Share Price | 2022/08/18 00:00 |
| Earnings | 2022/06/30 |
| Annual Earnings | 2021/12/31 |
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.