Investment Thesis
Energy Recovery is deeply unprofitable with a severe operating margin of -153% and declining 6.9% YoY revenue, indicating operational distress. While the balance sheet is fortress-like with $184.3M equity, zero debt, and $50.1M cash, the company continues to burn through profitability despite positive operating cash flow driven by non-cash charges. The strong cash position provides runway but cannot offset the fundamental lack of operational viability.
Strengths
- Fortress balance sheet with $184.3M equity and only $24.7M liabilities
- Exceptional liquidity with 9.28x current ratio and zero debt
- Positive free cash flow of $20.2M despite operational losses, providing near-term survival
- $50.1M cash reserves offer substantial runway for turnaround
Risks
- Revenue declining 6.9% YoY with only $9.7M in sales, indicating shrinking market demand
- Severe unprofitability: -$14.9M operating income and -$12.3M net income on minimal revenue base
- Massive operating margin of -153% and net margin of -126% showing business model failure at core level
- Negative ROE (-6.6%) and ROA (-5.9%) destroying shareholder value; unclear path to profitability
- Positive operating cash flow masking deterioration: likely driven by large non-cash charges rather than operational improvement
Key Metrics to Watch
- Revenue trend reversal and YoY growth rate normalization
- Operating margin recovery toward breakeven, then profitability
- Cash burn rate and months of runway remaining at current burn
- Operating cash flow sustainability and reconciliation with GAAP losses
Financial Metrics
Revenue
9.7M
Net Income
-12.3M
EPS (Diluted)
$-0.23
Free Cash Flow
20.2M
Total Assets
209.0M
Cash
50.1M
Profitability Ratios
Gross Margin
27.8%
Operating Margin
-153.1%
Net Margin
-126.2%
ROE
-6.6%
ROA
-5.9%
FCF Margin
208.4%
Balance Sheet & Liquidity
Current Ratio
9.28x
Quick Ratio
7.50x
Debt/Equity
0.00x
Debt/Assets
11.8%
Interest Coverage
N/A
Long-term Debt
0.0
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T10:09:57.050536 |
Data as of: 2026-03-31 |
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