Energy Recovery, Inc. (ERII)
Valuation Overview•Is Energy Recovery, Inc. Overvalued or Undervalued?
Trading at a relative discount to industry peers, suggesting a specific risk premium is applied.
Moderate quality score of 67/100, reflecting stable operating margins and manageable leverage.
Analysts remain bullish, forecasting further upside expansion with consensus targets suggesting solid gains.
Verdict: Solid fundamental quality, though growth presents a headwind.
Wall Street is highly bullish, projecting significant upside. This outlook is strongly supported by highly attractive capital returns, driven predominantly by aggressive share repurchases.
Returns capital exclusively via buybacks — no active dividend
ERII demonstrates strong business quality with robust profitability and healthy margins. This is backed by a fortress balance sheet, holding significant net cash ($39M) and minimal debt risk.
The company exhibits steady, low-single-digit revenue growth paired with stable bottom-line earnings. The company maintains healthy operational efficiency with a 19.9% operating margin.
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $9.7M | -7.1% | +2.4% | +7.9% | +11.7% | |
| EBITDA | -$9.1M | — | -3.1% | — | — | |
| Net Income | -$12.3M | -0.4% | -1.5% | — | — | |
| EPS (Diluted) | $-0.23 | +5.0% | +0.0% | -2.2% | — | |
| Free Cash Flow | $20.2M | -9.3% | +22.4% | +11.6% | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 64.3% | 66.6% | 67.6% | 69.3% |
| Operating Margin | 19.9% | 15.6% | 16.0% | 14.7% |
| Net Margin | 15.1% | 16.6% | 16.5% | 17.7% |
| FCF Margin | 19.9% | 14.8% | 11.7% | 7.0% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $-0.10 | $-0.23 | -130.0% | ||
| Q1'26 | $0.67 | $0.53 | -20.9% | ||
| Q4'25 | $0.09 | $0.12 | +33.3% | ||
| Q3'25 | $0.02 | $0.07 | +250.0% | ||
| Q2'25 | $-0.01 | $-0.13 | -1200.0% | ||
| Q1'25 | $0.42 | $0.50 | +19.0% | ||
| Q4'24 | $0.09 | $0.15 | +66.7% | ||
| Q3'24 | $0.05 | $0.09 | +91.1% |
Total return is -22.7% (1Y), lagging the benchmark by -47.7%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | -31.3% | -40.6% | — |
| 1Y | -22.7% | -47.7% | — |
| 3YCAGR | -30.0% | -50.7% | — |
| 5YCAGR | -14.0% | -27.8% | — |
| 10YCAGR | +0.5% | -13.3% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about Energy Recovery, Inc. (ERII) valuation, health, and returns.
Based on peer relative multiples, Energy Recovery, Inc. appears Cheap versus peers compared to industry peers.
Energy Recovery, Inc. has multiple valuation anchors: Peer Relative Fair Value: $11.79 | Wall Street Analyst Target: $12.50 (implying +32.7% upside). A convergence of these signals offers higher conviction.
Energy Recovery, Inc. displays good financial health with a composite quality score of 67/100, supported by a Altman Z-Score of 14.0 (safe zone), Piotroski F-Score of 6/9, Return on Invested Capital (ROIC) of 10.3%.
Energy Recovery, Inc. returns capital via buybacks instead of dividends, carrying a 7.3% buyback yield and reducing outstanding shares by -6.3% in the last 12 months.
Energy Recovery, Inc.'s current growth trajectory is Decelerating. The company achieved -7.1% 1Y revenue growth and +5.0% 1Y EPS growth, compared to its 3Y revenue CAGR of +2.4%.
Wall Street consensus is Buy based on 16 analysts, beating EPS expectations in 58% of recent quarters with a -2-quarter streak. The consensus price target represents a +32.7% change from current levels.
Investment risks for Energy Recovery, Inc. include: -56.3% 1-year max drawdown, high beta (1.59x market volatility). Volatility risk is characterized by a beta of 1.59x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.