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1. Company Snapshot

1.a. Company Description

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.


The company also offers a solution to reduce energy consumption in natural gas processing and in refrigeration systems that use carbon dioxide.It provides its products under the ERI, Ultra PX, PX, Pressure Exchanger, PX Pressure Exchanger, PX PowerTrain, VorTeq, IsoBoost, AT, and AquaBold names to large engineering, procurement, and construction firms; end-users and industry consultants; original equipment manufacturers; and aftermarket customers.The company was incorporated in 1992 and is headquartered in San Leandro, California.

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1.b. Last Insights on ERII

Energy Recovery's recent performance was negatively impacted by a slower rollout and muted expectations in its CO2 business. Despite strong performance in desalination and wastewater, the company's CO2 segment faced challenges. Earnings declined to $0.12 per share from $0.21 per share a year ago. To protect profitability, operational expenses in emerging CO2 technologies are being cut. The company reiterated its full-year revenue guidance for core businesses, with most revenues expected in Q4. (Source: Q3 2025 Earnings Call Transcript and Earnings Release)

1.c. Company Highlights

2. Energy Recovery Beats Expectations with Strong Q3 2025 Earnings

Energy Recovery reported a strong third quarter in 2025, with earnings per share (EPS) of $0.12, beating analyst estimates of $0.09. Revenue for the quarter was not explicitly stated, but the company reiterated its full-year revenue guidance of $120 million to $125 million. The company's ability to reduce operating expenses (OpEx) was notable, with guidance lowered to $45 million to $48 million. This reduction in OpEx, combined with a strong quarter of sales execution, improved mega-project shipments, and a rebound in wastewater revenue, positions the company for a solid finish to the year.

Publication Date: Nov -30

📋 Highlights
  • Strong Q3 Sales Execution:: Energy Recovery reported improved mega-project shipments and a rebound in wastewater revenue, driving a strong quarter.
  • Full-Year Revenue Guidance Reaffirmed:: The company maintains revenue guidance of $120M–$125M for 2025.
  • CO2 Business Commercialization Delay:: PX G product testing succeeded, but commercialization likely delayed to 2026 due to retailer reliance on OEM partnerships.
  • Cost Reduction and Strategic Investment:: Operating expenses reduced to $45M–$48M, alongside investments in international expansion and avoiding Chinese import tariffs.
  • Lithium Extraction Expansion:: A $350,000 pilot project in Argentina using PX technology is expected to generate revenue in Q4 2025.

CO2 Business Shows Promise

The company's CO2 business had a successful summer season of testing, validating the energy savings and water conservation benefits of its PX G product. While commercialization is likely to take another year, Energy Recovery is working with original equipment manufacturers (OEMs) to promote the product to large retailers, with test stores planned for the first half of 2026. As David Moon, President and Chief Executive Officer, highlighted, large retailers rely on OEMs for equipment design, installation, and service, indicating a potentially lengthy but fruitful partnership.

Wastewater Trends and Outlook

In the wastewater space, Energy Recovery is seeing long-term desalination trends and is cautiously optimistic about near-term results. The company expects to see backlog building for 2026, with a slow first half and a heavy second half. This outlook suggests that the company's efforts to reduce costs and invest strategically are paying off, positioning it for growth in the wastewater segment.

Valuation and Growth Prospects

With a P/E Ratio of 39.36 and an ROE of 10.09%, Energy Recovery's valuation suggests that the market is pricing in a certain level of growth. Analysts estimate next year's revenue growth at 9.2%, which may justify some of the premium. The company's ability to reduce costs and invest in new applications, such as lithium extraction, could drive future growth. The P/S Ratio of 5.66 and EV/EBITDA of 26.5 also indicate that investors are expecting significant growth from the company.

Future Prospects and Risks

Energy Recovery's exploration of new applications for its PX technology, including lithium extraction, is a positive development. The $350,000 project in Argentina expected to hit revenue this quarter is a tangible example of this effort. However, the company's reliance on OEMs for CO2 business commercialization and the slow start to 2026 in the wastewater segment are potential risks that investors should monitor.

3. NewsRoom

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4 Pollution Control Stocks to Watch on Robust Industry Trends

Nov -14

Source: zacks.com

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Aviva PLC Acquires 11,530 Shares of Energy Recovery, Inc. $ERII

Nov -14

Source: defenseworld.net

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Energy Recovery's CO2 Business Was Hampered, But The Name Remains Attractive

Nov -06

Source: seekingalpha.com

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Energy Recovery, Inc. (ERII) Q3 2025 Earnings Call Transcript

Nov -06

Source: seekingalpha.com

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Energy Recovery (ERII) Q3 Earnings and Revenues Top Estimates

Nov -05

Source: zacks.com

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Energy Recovery to Release Third Quarter 2025 Financial Results

Oct -09

Source: businesswire.com

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Energy Recovery Keeps Advancing On Its 3 Fronts, Waiting For Key Q3 And 1H26 On CO2

Aug -07

Source: seekingalpha.com

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Energy Recovery, Inc. (ERII) Q2 2025 Earnings Call Transcript

Aug -07

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.47%)

6. Segments

Water

Expected Growth: 8.45%

Water from Energy Recovery, Inc. growth driven by increasing adoption of pressure-exchanger technology, rising demand for energy-efficient solutions, and growing need for water conservation in industries such as oil and gas, chemical processing, and power generation.

Emerging Technologies

Expected Growth: 10.58%

Energy Recovery Inc.'s 10.58% growth in Emerging Technologies is driven by increasing adoption of pressure exchanger technology in desalination and industrial wastewater treatment, rising demand for energy-efficient solutions, and strategic partnerships expanding its global footprint.

7. Detailed Products

PX Pressure Exchanger

A device that helps to recover energy from high-pressure streams, reducing the energy required for desalination and other industrial processes.

AT Turbocharger

A turbocharger that captures waste energy from industrial processes and converts it into useful power.

IsoBoost

A system that increases the efficiency of industrial processes by capturing and converting waste energy into useful power.

IsoGen

A system that generates electricity from waste heat, reducing emissions and increasing efficiency in industrial processes.

VorTeq

A hydraulic pressure boosting system that increases the efficiency of hydraulic fracturing operations.

8. Energy Recovery, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Energy Recovery, Inc. faces moderate threat from substitutes due to the presence of alternative energy recovery technologies.

Bargaining Power Of Customers

Energy Recovery, Inc. has a diverse customer base, which reduces the bargaining power of individual customers.

Bargaining Power Of Suppliers

Energy Recovery, Inc. relies on a few key suppliers for critical components, which gives them some bargaining power.

Threat Of New Entrants

Energy Recovery, Inc. operates in a niche market with high barriers to entry, making it difficult for new entrants to compete.

Intensity Of Rivalry

Energy Recovery, Inc. operates in a highly competitive market with several established players, leading to intense rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 5.70%
Debt Cost 3.95%
Equity Weight 94.30%
Equity Cost 10.26%
WACC 9.90%
Leverage 6.04%

11. Quality Control: Energy Recovery, Inc. passed 8 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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CECO Environmental

A-Score: 4.5/10

Value: 2.0

Growth: 6.0

Quality: 6.6

Yield: 0.0

Momentum: 9.5

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
Energy Recovery

A-Score: 4.3/10

Value: 1.4

Growth: 7.6

Quality: 8.2

Yield: 0.0

Momentum: 3.0

Volatility: 5.3

1-Year Total Return ->

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TOMI Environmental Solutions

A-Score: 4.1/10

Value: 6.8

Growth: 3.3

Quality: 3.6

Yield: 0.0

Momentum: 9.0

Volatility: 1.7

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Fuel Tech

A-Score: 3.8/10

Value: 5.6

Growth: 2.4

Quality: 3.5

Yield: 0.0

Momentum: 9.5

Volatility: 2.0

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Manitex International

A-Score: 3.8/10

Value: 4.6

Growth: 4.7

Quality: 3.5

Yield: 0.0

Momentum: 6.0

Volatility: 4.0

1-Year Total Return ->

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ClearSign Technologies

A-Score: 3.8/10

Value: 6.4

Growth: 7.4

Quality: 3.7

Yield: 0.0

Momentum: 4.0

Volatility: 1.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

14.72$

Current Price

14.72$

Potential

-0.00%

Expected Cash-Flows