Energy Recovery, Inc. ERII currently seems to be a smart choice for investors, seeking exposure in the pollution control space. Solid fundamentals and positive revision in earnings estimates are reflective of healthy growth potential of the stock.
This San Leandro, CA-based company currently carries a Zacks Rank #2 (Buy). It belongs to the Zacks Pollution Control industry, currently placed in the top 40% (with Zacks Industry Rank #102) of more than 250 Zacks industries. Notably, the top 50% of the Zacks-ranked industries tend to outperform the bottom 50% by a factor of more than 2 to 1.
We believe that stringent government regulations, pollution-related risks and growing demand in emerging nations are aiding pollution control equipment and services.
Below we discussed why investing in Energy Recovery will be a smart choice.
Share Price Performance, Impressive Earnings Outlook: Market sentiments seem to be working in favor of Energy Recovery over time. In the past year, the company’s share price has gained 20.9% compared with the industry’s growth of 14.4%.
It is worth mentioning here that its shares have gained 7.2% since the release of first-quarter 2019 results on May 2, 2019. The company’s quarterly earnings of 5 cents per share were 66.67% above the Zacks Consensus Estimate of 3 cents. Average earnings surprise for the last four quarters was a positive 225%.
The company stands to gain from growing demand for fresh water across the globe as well as technological advancements in the oil & gas activities.
In the past 60 days, earnings estimates for 2019 and 2020 have been revised upward, reflecting positive sentiments about the company’s growth prospects. Currently, the Zacks Consensus Estimate for Energy Recovery is pegged at 27 cents for 2019 and 54 cents for 2020, reflecting growth of 3.8% and 10.2% from the respective 60-day-ago tallies. In addition, earnings estimates for the second quarter of 2019 have grown from 5 cents per share to 6 cents.
Energy Recovery, Inc. Price and Consensus
Energy Recovery, Inc. price-consensus-chart | Energy Recovery, Inc. Quote
Healthy Water Business: The company operates through two segments, one being Water segment. This business stands to gain from growing popularity of seawater reverse osmosis (SWRO) desalination in the water industry across the world.
Energy Recovery provides energy recovery devices (including PX Pressure Exchanger and AT Turbocharger) and pumps (including AquaBold High Pressure Pump, Horizontal Circulation Pump and Vertical Circulation Pump).
It is worth mentioning here that the company has won multiple contracts to deliver its PX Pressure Exchanger to customers in Asia, the Kingdom of Saudi Arabia, the United Arab Emirates and Oman so far in 2019.
Growing Oil & Gas Business: The second business segment of Energy Recovery is Oil & Gas. Technological expertise, extensive marketing efforts, and rising demand for hydraulic fracturing solution and mud pumping solutions have been boons for this business. Main product brands under this segment are VorTeq and MTeq.
Notably, the company entered a 15-year licensing agreement related to VorTeq with Schlumberger Technology Corporation in October 2015.
Debt Profile: Energy Recovery’s non-current liabilities totaled $35.8 million at the end of the first quarter of 2019. This balance reflects a decline of 9% from the previous quarter. The company’s debt profile is better than the industry. Its long-term debt/capital of 9.3% is significantly lower than the industry’s 39.4%.
Other Key Picks
Some other top-ranked stocks in the Zacks Industrial Products sector are Roper Technologies, Inc. ROP, CECO Environmental Corporation CECE and Tetra Tech, Inc. TTEK. While Roper currently flaunts a Zacks Rank #1, CECO Environmental and Tetra Tech carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for all these three stocks have improved for the current year. Further, average earnings surprise for the last four quarters was a positive 8.43% for Roper, 25% for CECO Environmental and 8.22% for Tetra Tech.
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