Value
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.2 |
| P/S | 8.0 |
| EV/EBITDA | 4.2 |
| Fwd P/E | 7.4 |
| PEG | 10.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 16.8x
- ▸PEG: 0.38
- ▸Attractively valued
ERII · Why this verdict
Why Energy Recovery (ERII) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score6.4/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The engine's asymmetry gate has failed at the current spot price, with only a 0.5 risk/reward ratio against the 1.5 threshold required, reflecting a thin 5.8% upside margin. Warnings | The asymmetry ratio should climb above 1.5 as the price pulls back to a better entry or estimates improve. | →Stable |
| CounterA recovery setup with improving MACD could see the stock re-rate quickly, improving the risk/reward without needing a lower entry price. | ||
Energy Recovery screens as attractively valued at 16.5x forward P/E and a 0.37 PEG ratio, alongside a strong growth profile of 20% year-over-year revenue growth. Bull case | The valuation discount should narrow as growth is sustained and recognized by the market. | →Stable |
| CounterA cheap multiple paired with a confirmed technical downtrend can persist for a long time if the market doubts growth durability. | ||
Energy Recovery has triggered a confirmed death cross with the 200-day moving average declining 6.3% over 30 days, a hard-block condition for the engine even as RSI has recovered to 62. Warnings | The death cross should resolve with the price reclaiming its 200-day moving average. | →Stable |
| CounterThe engine's own setup rationale notes the MACD is improving, suggesting the downtrend may already be in the process of reversing despite the death cross label. | ||
The bear case flags a leverage penalty from a 4.8 debt-to-equity ratio alongside two consecutive earnings misses. Bear case | Debt-to-equity should decline and the company should return to beating consensus estimates. | →Stable |
| CounterStrong margins of 15% and a high Piotroski F-Score of 8 out of 9 suggest the underlying business can service its debt load even amid short-term earnings misses. | ||
Insiders have made modest purchases worth roughly $111,000 even as the stock trades in a confirmed technical downtrend. Insider breakdown | Insider buying should continue or increase in size, reinforcing confidence in a bottom. | →Stable |
| CounterA modest insider purchase of just 0.024% of market cap is too small to reliably signal a durable turnaround. | ||
The engine's asymmetry gate has failed at the current spot price, with only a 0.5 risk/reward ratio against the 1.5 threshold required, reflecting a thin 5.8% upside margin.
→StableWarnings
- Expectation
- The asymmetry ratio should climb above 1.5 as the price pulls back to a better entry or estimates improve.
CounterA recovery setup with improving MACD could see the stock re-rate quickly, improving the risk/reward without needing a lower entry price.
Energy Recovery screens as attractively valued at 16.5x forward P/E and a 0.37 PEG ratio, alongside a strong growth profile of 20% year-over-year revenue growth.
→StableBull case
- Expectation
- The valuation discount should narrow as growth is sustained and recognized by the market.
CounterA cheap multiple paired with a confirmed technical downtrend can persist for a long time if the market doubts growth durability.
Energy Recovery has triggered a confirmed death cross with the 200-day moving average declining 6.3% over 30 days, a hard-block condition for the engine even as RSI has recovered to 62.
→StableWarnings
- Expectation
- The death cross should resolve with the price reclaiming its 200-day moving average.
CounterThe engine's own setup rationale notes the MACD is improving, suggesting the downtrend may already be in the process of reversing despite the death cross label.
The bear case flags a leverage penalty from a 4.8 debt-to-equity ratio alongside two consecutive earnings misses.
→StableBear case
- Expectation
- Debt-to-equity should decline and the company should return to beating consensus estimates.
CounterStrong margins of 15% and a high Piotroski F-Score of 8 out of 9 suggest the underlying business can service its debt load even amid short-term earnings misses.
Insiders have made modest purchases worth roughly $111,000 even as the stock trades in a confirmed technical downtrend.
→StableInsider breakdown
- Expectation
- Insider buying should continue or increase in size, reinforcing confidence in a bottom.
CounterA modest insider purchase of just 0.024% of market cap is too small to reliably signal a durable turnaround.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Energy Recovery screens as cheap and fast-growing with insiders buying, but a confirmed death cross, leverage concerns, consecutive earnings misses, and a thin risk/reward ratio at the spot price all argue for caution.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.6 |
| ROA | 5.0 |
| Gross margin | 8.9 |
| Net margin | 7.5 |
| Current ratio | 5.0 |
| FCF quality | 7.0 |
| Moat | 7.9 |
| Piotroski F | 10.0 |
- ▸Strong margins: 15%
- ▸Wide economic moat
- ▸Strong Piotroski F-Score: 9/9
Growth
8.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 7.6 |
| EPS growth | 10.0 |
- ▸Strong growth: 20% YoY
Momentum
2.7/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 6.6 |
| OBV | 1.0 |
| MA position | 1.0 |
| Volume | 0.6 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -6.5%/30d — confirmed downtrend
Sentiment
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 8.4 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 28%
Insider
7.5/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 6.5 |
| insider conviction | 6.0 |
| holder change | 10.0 |
- ▸Modest insider buying — $136,328 (0.029% of mkt cap)
- ▸Institutions accumulating
Peer rank
6.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.3 |
| quality rank | 5.0 |
| growth rank | 6.0 |
Technical
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 5.7 |
| support resistance | 6.2 |
| 52w position | 0.0 |
| gap | 6.0 |
Risk (lower is worse)
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.5 |
| days to cover | 8.2 |
| volatility | 0.0 |
| put call | 10.0 |
| implied vol | 0.0 |
| beta | 7.6 |
| debt equity | 9.8 |
- ▸High IV: 109%
Catalyst
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 4.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
- ▸Earnings concerns: 2B/2M
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more. | News modifier -1 (HOLD_IF_HOLDING → SELL_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_HOLD|L3:NEWS_MOD=-1Passed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:29d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (3)
- MOMENTUM:2.7<4.5
- ASYMMETRY:0.8<1.5@spot
- DEATH_CROSS:HARD_BLOCK
Warning (0)
none
Reward-to-Risk
0.83
Upside
+8.5%
Downside
10.2%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 51
EdgeInst Constrain — Small cap ($0.5B) below institutional reach
SuitabilitySpeculative — Drawdown -53% (>40% off 52w high)
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: INSIDER:OK. Top dim: Growth at 8.8; weakest: Momentum at 2.7. No conviction either direction.
The strongest dimensions are Growth at 8.8, Insider at 7.5, and Value at 7.0; the weakest are Momentum at 2.7, Technical at 4.5, and Catalyst at 5.6. The V9 engine flagged 3 failed gates, producing an asymmetric reward-to-risk of 0.83 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Attractive Valuation Strong Growth
Trip ifForward P/E rises above 20x while revenue growth stays above 15% year-over-year.
- P2Confirmed Downtrend Death Cross
Trip ifThe stock stays below its 200-day moving average for 2 more consecutive months.
- P3Leverage Penalty Consecutive Misses
Trip ifMiss_count reaches at least 3 consecutive quarters.
- P4Thin Risk Reward Failed Asymmetry Gate
Trip ifAsymmetry ratio stays below 1.0 for 2 more consecutive engine runs.
- P5Insider Buying Amid Downturn
Trip ifInsider signal flips to net selling that exceeds $200,000 over the next 90 days.