Forensic Analysis · Machinery & Fabricated Metal Products · as of Nov 11, 2026
Energy Recovery, Inc. (ERII)
A forensic read on Energy Recovery, Inc. built from its complete SEC filings — financial-health screens, earnings quality, red flags and a price-aware rating. Reproducible math, not opinion.
A · High-quality, modest growth
Forensic grade
Safe
Financial health
15.7
Distress distance
2
Forensic signals
11.0%
ROE
-6.9%
Revenue growth
This free snapshot doesn't read filing or proxy text, so the auditor-quality and governance checks that can lower a grade were not evaluated (auditor quality, say on pay, board independence, going concern). Those checks only ever lower a grade, so the full analysis can land below the grade above but never above it — treat it as the most favourable reading, not the settled one.
Energy Recovery, Inc. earns an A (High-quality, modest growth) forensic quality grade, and its balance-sheet distress test reads 15.7, placing it in the Safe zone. 2 forensic signals were flagged in its latest SEC filings, led by shareholder returns.
What the filings flag
204% of FCF
FY2025
Shareholder returns.Returned $36M to shareholders (buybacks + dividends) in FY2025 — 204% of free cash flow. That is $18M (104%) more than free cash flow covered, and more than operating cash flow as well. It came out of the balance sheet's own liquid holdings, not new debt: cash and short-term investments fell $3M over FY2025 — $3M of the $18M. The FY2025 cash-flow statement filed $2M from shares issued; $31M of investments purchased; $10,000 from sales of property and equipment; net cash provided by investing activities of $34M; net cash used in financing activities of $35M. A payout past free cash flow draws the balance sheet down in every year it continues, which isn't sustainable indefinitely. Counting the $8M of stock-based comp paid out in shares on top of that, the combined claim on free cash flow is 249%.
11.2%
FY2025
Return on invested capital.Return on invested capital is 11.2% in the latest fiscal year and steady across FY2023–FY2025, inside a 1.2-point range. After-tax operating profit was $17M in FY2023 and $20M in FY2025, with operating income at 14.8% of revenue in FY2023, 13.6% in FY2024 and 17.7% in FY2025. The capital base behind it went from $163M in FY2023 to $178M in FY2025 (+9%), while the revenue it carried went from $128M to $135M. $38M of the $178M base at FY2025 is short-term investments (21.2%) — securities held beside cash, which the base keeps because only cash is subtracted from it; they earn the balance sheet's yield, which is not in the operating profit above, so this rate understates what the operating capital earns.
Key fundamentals
Latest Revenue$135.0M
Revenue Growth YoY-6.9%
Revenue CAGR (2yr)+2.6%
Net Margin17.0%
Free Cash Flow$17.4M
Return on Equity11.0%
The forensic grade and screens above are free — no account needed. Want the AI investment read on top — the 0–100 rating, thesis, bull-vs-bear, red flags and the 12-month scenario, written from Energy Recovery, Inc.'s actual 10-K/10-Q/8-K filings?