Energy Recovery, Inc. (ERII) Stock

Energy Recovery, Inc. (ERII) is a Industrials stock trading at $7.66 (as of 2026-09-03), with a market capitalization of $391.00M and a trailing P/E of 25.5. Figures are sourced from first-party U.S. SEC EDGAR filings and market data.

Energy Recovery, Inc., through its Water and Emerging Technologies segments, designs, manufactures, and sells equipment and services used in seawater reverse osmosis desalination and industrial wastewater treatment, including energy recovery devices, high-pressure pumps, and related spare parts and field services. It also provides an energy-reduction solution for natural gas processing and certain carbon dioxide refrigeration systems for engineering firms, end-users, consultants, original equipment manufacturers, and aftermarket customers.

Understand Energy Recovery, Inc.: how it makes money

Energy Recovery makes pressure exchangers and high-pressure pumps for desalination plants and industrial wastewater systems, selling the equipment upfront plus aftermarket parts and repair. Revenue splits across new-project builds, a few megaprojects, and recurring aftermarket service, with a small spin-off into gas-processing technology.

The 75% gross margin on pressure-exchanger IP is genuine, but revenue is lumpy project work against a large fixed-cost base, so operating margin swings violently with the desalination buildout cycle.

Business quality (Weak): The IP and gross margin are real, but the current demand lull has the business starved for volume, and the fixed-cost structure punishes every quarter without a new project landing.

Valuation: At 26× earnings, ERII trades 20% below the Machinery average (32×).

Bull case

  • Multi-year pipeline de-risks timing: Management cites four to five years of pipeline visibility, a critical signal after the recent demand lull. Converting that backlog would spread the fixed-cost base over more units and restore the operating model.
  • Trading at a discount: The stock sits at a P/E of 26.0x versus the Machinery industry average of 32x, a 20% discount. That gap implies the market is already pricing in persistent underperformance, so any pipeline conversion or aftermarket recovery has room to re-rate the multiple.
  • Capex stays under control: Annual total capex guidance of $3 million to $6 million for the Saudi facility means the company is not locking up cash in large construction. That keeps balance-sheet flexibility intact while emerging projects ramp.

Bear case

  • Geopolitics delays project cash: Management flags that geopolitical risk is driving financing, procurement, and logistics delays. For a project-based business, even a few months of slippage per deal compounds into a full quarter of lost revenue.
  • Operating losses are severe: Operating margin sits at -49% even with a 75% gross margin, meaning the fixed-cost base is far above current volume. Every additional month without new project awards deepens the operating hole.
  • Soft demand is broad-based: Wastewater performance remained per management's own framing, and OEM and aftermarket revenue has fallen below the prior-year level. That points to a demand gap across the installed base, not a single slipping project.
Valuation — source: SEC EDGAR (first-party)
Price$7.66
Market Cap$391.00M
P/E Ratio25.5
EV / EBITDA18.3
Price / Book2.27
Price / Sales3.24
FCF Yield4.5%
DCF Value (model)$4.40
DCF Upside vs Price-42.6%
Profitability & Growth — source: SEC EDGAR
Revenue (TTM)$134.99M
Net Margin17.0%
Revenue Growth (YoY)-57.2%
EPS Growth (YoY)-250.0%
FCF Growth (YoY)284.7%
Financial Health — source: SEC EDGAR
Altman Z-Score12.14 (safe)
Valuation vs Sector & Industry
Stock P/E25.5
Sector P/E (Industrials)25.5
Industry P/E (Machinery)32.0
vs Sector0.0%
vs Industry-20.3%
Smart-Money Activity — SEC Form 4 / 13F / Congressional disclosures
Top Institutional HolderBlackRock, Inc. ($61.34M)
Institutional Holders Tracked10
Company
SectorIndustrials
IndustryMachinery
CEODavid W. Moon
Employees254
CountryUS
IPO Date2008-07-02

Energy Recovery, Inc. earnings call transcripts

  • ERII Q2 FY26 earnings call transcript (reported 2026-08-05) · analysis
  • ERII Q1 FY26 earnings call transcript (reported 2026-05-06) · analysis

All ERII earnings calls

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  • Veeco Instruments Inc. (VECO)
  • CVD Equipment Corporation (CVV)
  • Cricut, Inc. (CRCT)
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ERII earnings history · ERII institutional & insider holders · ERII KPIs & operating metrics · ERII financials · ERII investor presentations & press releases · ERII SEC filings · ERII peers · Congress trades · Insider trades · Short interest · Stock screener

Data as of 2026-09-03.

Figures sourced from U.S. Securities and Exchange Commission (SEC EDGAR) filings and market data. Not personalized investment advice.