Energy Recovery, Inc. (ERII) stock analysis
Close on Nov 12, 2026Market cap $365.99MP/E 79.7Yield –
StockData Score
Prices as of Nov 11, 2026How the score works
Weak6 of 30 checks passed
Energy Recovery passes 6 of the 30 checks behind our score; 6 could not be run for lack of data and count as not passed. Each dot in the shape is one check — hover it for the numbers.
- Valuation
- 0/6
- Growth
- 0/6
- Past performance
- 0/6
- Financial health
- 6/6
- Dividend
- 0/6
What stands out
No debt
Energy Recovery has no borrowings on its latest balance sheet.
Interest well covered
No meaningful interest expense to cover.
Debt covered by cash flow
There is no debt to cover.
Low bankruptcy risk
The Altman Z-score is 10.51; above 3 is the safe zone and below 1.8 the distress zone.
What to watch
Margin of safety under 20%
The price is 60.8% above fair value, so there is no margin of safety.
Trading above fair value
The share price of $7.33 is above our fair value estimate of $4.56.
Return on equity under 15%
Return on equity was 3.0% over the last twelve months and averaged 10.7% over five years; we look for 15% on both.
Return on capital under 10%
Return on invested capital was 0.8%, below the 10% that usually covers the cost of capital.
Valuation0/6
P/E above its 5-year median
Energy Recovery's P/E of 81.4 is above its own 5-year median of 47.4.
P/E above the industry
Energy Recovery's P/E of 81.4 is above the Special Industry Machinery, except Metalworking median of 32.8.
EV/EBITDA above its 5-year median
Energy Recovery's EV/EBITDA of 61.6 is above its 5-year median of 39.8.
P/B above the industry
Energy Recovery's price-to-book of 2.27 is above the Special Industry Machinery, except Metalworking median of 2.10.
Trading above fair value
The share price of $7.33 is above our fair value estimate of $4.56.
Margin of safety under 20%
The price is 60.8% above fair value, so there is no margin of safety.
Growth0/6
Revenue growing under 10% a year
Revenue grew 2.4% a year over the last three fiscal years, short of the 10% we look for.
EPS growing under 10% a year
Diluted EPS grew 0.0% a year over the last three fiscal years.
Earnings growth not accelerating
Net income grew -73.7% over the last twelve months, against a 5-year average of -2.7% a year.
Growing slower than the industry
Revenue grew -26.2% over the last twelve months; the Special Industry Machinery, except Metalworking median is 5.7%.
Company guidance
No outlook found in earnings releases from the last twelve months.
Gross margin slipping
Gross margin was 61.0% over the last twelve months, against 66.6% a year earlier.
Past performance0/6
Return on equity under 15%
Return on equity was 3.0% over the last twelve months and averaged 10.7% over five years; we look for 15% on both.
Return on capital under 10%
Return on invested capital was 0.8%, below the 10% that usually covers the cost of capital.
Return on equity below the industry
Energy Recovery's return on equity of 3.0% is below the Special Industry Machinery, except Metalworking median of 4.6%.
Earnings shrank over 5 years
Net income shrank 2.7% a year on average over the last five fiscal years.
Net margin below its 5-year average
Net margin was 5.1% over the last twelve months, against a 5-year average of 16.5%.
Net margin below the industry
Energy Recovery's net margin of 5.1% is below the Special Industry Machinery, except Metalworking median of 5.1%.
Financial health6/6
No debt
Energy Recovery has no borrowings on its latest balance sheet.
Debt not rising
With no debt today, leverage cannot have risen.
Debt covered by cash flow
There is no debt to cover.
Interest well covered
No meaningful interest expense to cover.
Short-term assets cover short-term debts
Current assets are 7.22 times current liabilities.
Low bankruptcy risk
The Altman Z-score is 10.51; above 3 is the safe zone and below 1.8 the distress zone.
Dividend0/6
No dividend
Energy Recovery has not paid a dividend in the last twelve months.
Yield against Treasuries
No dividend.
Yield against the market
No dividend.
Dividend stability
No dividend.
Earnings cover
No dividend.
Cash-flow cover
No dividend.
Fair value
How we estimate itOur estimate per share
$4.56
The share price is 61% above this estimate.
| Method | Multiple used | Own 5Y median | Industry median | Value per share | Weight |
|---|---|---|---|---|---|
| P/E | 40.2× | 47.4× | 32.8× | $3.61 | 40% |
| EV/EBITDA | 29.6× | 39.8× | 19.3× | $4.37 | 35% |
| P/B | 3.3× | 4.5× | 2.1× | $10.72 | 10% |
| Earnings power | 11.5% cost of equity | – | – | $3.41 | 15% |
| Fair value | $4.56 | 100% | |||
Valuation over time
Using the earnings and balance sheet published at each date, not today's.
- P/E at month end
- Own 5-year median 47.4
- Special Industry Machinery, except Metalworking median 32.8
An estimate from reported numbers and market multiples, not a price target or investment advice. It can be far off for companies whose profits are about to change sharply.
Market risk
From the past year of daily prices.
Liquidity
Medium risk
- Average value traded per day
- $6.12M
- Value traded per 1% price move
- $4.53M
Downside
High risk
- Typical loss in a bad month
- 36.3%
- Volatility (annualized)
- 55%
- Sharpe ratio, 1 year
- -0.94
- Beta to the S&P 500 (5Y)
- 1.33
Typical bad-month loss, week by week
Margins
Share of revenue, fiscal years 2011 to 2025
Gross margin
Operating margin
Net margin
Growth rates
Compound annual growth to fiscal 2025
| Per year | 1 year | 3 years | 5 years | 10 years | Five-year pace |
|---|---|---|---|---|---|
| Revenue | -6.9% | +2.4% | +2.6% | +11.9% | |
| Gross profit | -9.3% | +0.2% | – | +13.6% | |
| Operating income | +21.1% | -1.3% | -5.3% | – | |
| Net income | -0.4% | -1.5% | -2.7% | – | |
| EPS, diluted | +5.0% | 0.0% | -2.2% | – | |
| Free cash flow | -9.3% | +27.6% | +11.6% | -12.8% |
Returns and balance sheet
10 fiscal years. Hover a measure to see how it is calculated.
| Measure | FY2016 | FY2020 | FY2025 | Trend |
|---|---|---|---|---|
| Return on equity | 5.6% | 17.2% | 11.0% | |
| Return on assets | 2.5% | 13.4% | 9.7% | |
| Current ratio | 7.13 | 9.10 | 10.44 | |
| Debt to equity | 0.00 | – | – | |
| Net debt to EBITDA | -9.25× | – | – | |
| Interest coverage | 1142.0× | – | – | |
| Inventory turnover | 4.7× | – | 1.9× | |
| Capex to revenue | 1.9% | 5.7% | 1.0% | |
| Diluted shares | 55M | 57M | 54M |
Where the cash went
Fiscal 2021 to 2025, five years combined
Energy Recovery generated $91.50M from operations and spent $152.12M on capital expenditure, dividends and share buybacks. 11% of that went back into the business.
DuPont analysis
Return on equity split into margin, efficiency and leverage
| Fiscal year | Net margin | Asset turnover | Equity multiplier | Return on equity |
|---|---|---|---|---|
| FY2025 | 17.0% | 0.57× | 1.14× | 11.0% |
| FY2024 | 15.9% | 0.58× | 1.15× | 10.7% |
| FY2023 | 16.8% | 0.55× | 1.16× | 10.6% |
| FY2022 | 19.1% | 0.58× | 1.18× | 13.2% |
| FY2021 | 13.7% | 0.50× | 1.19× | 8.1% |
| FY2020 | 22.2% | 0.61× | 1.28× | 17.2% |
| FY2019 | 12.6% | 0.47× | 1.48× | 8.8% |
| FY2018 | 29.6% | 0.43× | 1.68× | 21.5% |
| FY2017 | 26.6% | 0.44× | 1.95× | 22.9% |
| FY2016 | 6.4% | 0.38× | 2.27× | 5.6% |
Piotroski F-Score
Nine tests of profitability, balance sheet and efficiency, fiscal 2025 against fiscal 2024
- ProfitableNet income above zero$22.96M
- Cash generatingOperating cash flow above zero$18.77M
- Return on assets improvedROA up on the prior year9.1% → 9.5%
- Earnings backed by cashOperating cash flow above net income$18.77M vs $22.96M
- Less leverageLong-term debt to assets fell– → –
- Better liquidityCurrent ratio rose7.41 → 10.44
- No dilutionShare count did not rise58M → 54M
- Gross margin improvedGross margin up on the prior year66.87% → 65.14%
- More efficientAsset turnover rose0.57 → 0.56
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