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Did Energy Recovery's (NASDAQ:ERII) Share Price Deserve to Gain 86%?

Simply Wall St

Energy Recovery, Inc. (NASDAQ:ERII) shareholders might be concerned after seeing the share price drop 13% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 86% has certainly bested the market return!

Check out our latest analysis for Energy Recovery

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last half decade, Energy Recovery became profitable. That would generally be considered a positive, so we'd expect the share price to be up.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

NasdaqGS:ERII Past and Future Earnings, December 12th 2019

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Energy Recovery's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Energy Recovery provided a TSR of 14% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 13% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Before spending more time on Energy Recovery it might be wise to click here to see if insiders have been buying or selling shares.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.