| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 50.79 | 286 |
| Intrinsic value (DCF) | 0.83 | -94 |
| Graham-Dodd Method | 5.46 | -58 |
| Graham Formula | 8.29 | -37 |
Energy Recovery, Inc. (NASDAQ: ERII) is a leading innovator in energy efficiency solutions for seawater reverse osmosis (SWRO) desalination and industrial wastewater treatment. Headquartered in San Leandro, California, the company designs and manufactures high-performance energy recovery devices (ERDs) and pumps under brands like PX Pressure Exchanger and VorTeq, which significantly reduce energy consumption in critical water and gas processing applications. Serving engineering firms, OEMs, and end-users globally, Energy Recovery operates in the fast-growing industrial pollution and treatment controls sector, addressing the increasing global demand for sustainable water solutions. With a market cap of approximately $685 million, the company is positioned at the intersection of water scarcity challenges and industrial decarbonization, leveraging its proprietary Pressure Exchanger technology to drive cost savings and environmental benefits. Its emerging technologies segment further explores applications in CO2 refrigeration and natural gas processing, expanding its addressable market.
Energy Recovery presents a compelling growth opportunity in the water technology and industrial efficiency space, supported by its proven PX technology and expanding pipeline in emerging markets. The company’s strong gross margins (driven by patented IP) and debt-light balance sheet ($29.6M cash vs. $11.3M debt) provide financial flexibility. However, its small scale ($145M revenue) and concentrated exposure to desalination (subject to project timing) introduce volatility, as reflected in its beta of 1.09. Near-term growth hinges on adoption of VorTeq in shale gas and IsoBoost in CO2 refrigeration, both unproven at scale. Investors should weigh its technological moat against execution risks in new verticals.
Energy Recovery dominates the ERD market for large-scale SWRO desalination plants with its PX Pressure Exchanger, achieving >98% energy recovery efficiency—a 10-15% improvement over competitors. This technology has become the industry standard, with an estimated 90%+ market share in mega-desalination projects. The company’s competitive edge stems from 25+ years of R&D, 150+ patents, and a direct sales model that fosters long-term client relationships (e.g., partnerships with IDE Technologies and Doosan Enerbility). However, it faces mounting pressure in industrial wastewater from diversified players like Flowserve and Sulzer offering broader pump portfolios. In emerging segments, VorTeq competes with traditional hydraulic fracturing equipment, requiring demonstrable ROI to displace incumbents. While no rival matches ERI’s ERD specialization, smaller firms like Danfoss (CO2 refrigeration) and Schlumberger (oilfield tech) could impede expansion. Geographic diversification (60% international revenue) mitigates regional risks but exposes the firm to currency fluctuations.