Energy Recovery Inc. Common Stock (ERII)

FairStock Score: 48/100 — MIXED

Key Financials

AI Analysis

AI-generated, general educational analysis — not personal investment advice.

I look for a durable business bought at a sensible price. Energy Recovery is a small industrial, with 230 employees, selling energy-efficiency equipment for water treatment through Water and Emerging Technologies segments. The niche may offer a modest technology moat, but the numbers show a lumpy, project-driven business. In fiscal 2025, the year ended 2025-12-31, revenue was $135.0M and net income $23.0M, or $0.42 per diluted share. That was roughly flat versus fiscal 2024, the year ended 2024-12-31, revenue of $144.9M and net income of $23.1M. More recently, fiscal Q1 2026, the quarter ended 2026-03-31, produced revenue of $9.7M and a net loss of $12.3M, or -$0.23 per diluted share; fiscal Q2 2026, the quarter ended 2026-06-30, had revenue of $12.0M and a net loss of $3.2M, or -$0.06 per diluted share. Compared with fiscal Q2 2025, the quarter ended 2025-06-30, revenue of $28.1M and net income of $2.1M, the latest quarter is weak. The balance sheet is a genuine strength: debt-to-equity is 0.05, Altman Z-score 9.88, and trailing free cash flow is $38.6M, an 11.0% FCF yield on the $349.7M market cap at the 2026-10-13 close. Piotroski is 7/9. But returns are modest: ROE 8.58%, ROCE 6.00%. FairStock calls it a SLOW GROWER - Shrinking, with profit down 2.7% a year over five years and revenue up 2.6%. At the $6.85 close on 2026-10-13, FairStock P/E is 26.35, P/B 2.03, EV/EBITDA 13.24, and the Graham Number is $4.44, implying a negative 54.28% margin of safety. I see cash generation but not enough evidence of durable growth or a bargain price.

In plain English: Energy Recovery makes equipment that helps water treatment plants save energy. The business has been weak lately: sales dropped and it lost money in the most recent quarters, though it was profitable in fiscal 2025 and produces cash. At $6.85, the stock looks expensive compared with a conservative estimate of its value and its recent profits.

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Data as of 2026-10-13 close · note generated 2026-10-15 · model deepseek-flash

Sources (SEC EDGAR): fiscal Q2 2026 10-Q (period ended 2026-06-30) · fiscal Q1 2026 10-Q (period ended 2026-03-31) · fiscal Q3 2025 10-Q (period ended 2025-09-30) · fiscal Q2 2025 10-Q (period ended 2025-06-30) · FY2025 10-K (period ended 2025-12-31) · FY2024 10-K (period ended 2024-12-31) · FY2023 10-K (period ended 2023-12-31)

Fundamentals from company filings and market-data providers; prices are end-of-day, not real-time. AI-generated analysis is general and educational — not personal investment advice. Scoring methodology · Score test · Disclaimer