As you might know, Energy Recovery, Inc. (NASDAQ:ERII) last week released its latest first-quarter, and things didn’t turn out so great for shareholders. The numbers were weak, with revenues of US$12m coming in 10% short of analyst estimates. Statutory losses were US$0.14 per share, 3.7% larger than what the analysts expected. This is an important time for investors, as they can track a company’s performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
View our latest analysis for Energy Recovery
Taking into account the latest results, the most recent consensus for Energy Recovery from four analysts is for revenues of US$146.3m in 2024. If met, it would imply a notable 15% increase on its revenue over the past 12 months. Per-share earnings are expected to increase 7.6% to US$0.37. Before this earnings report, the analysts had been forecasting revenues of US$146.6m and earnings per share (EPS) of US$0.38 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
It might be a surprise to learn that consensus the price target fell 5.6% to US$21.00, with the analysts clearly linking lower forecast earnings to the performance of the stock price. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Energy Recovery at US$24.00 per share, while the most bearish prices it at US$17.00. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Energy Recovery’s growth to accelerate, with the forecast 21% annualized growth to the end of 2024 ranking favorably alongside historical growth of 6.7% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 3.6% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Energy Recovery to grow faster than the wider industry.
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The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Energy Recovery. Fortunately, they also reconfirmed their revenue numbers, suggesting that it’s tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts apparently not reassured by the latest results, leading to a lower estimate of Energy Recovery’s future valuation.
With that in mind, we wouldn’t be too quick to come to a conclusion on Energy Recovery. Long-term earnings power is much more important than next year’s profits. We have forecasts for Energy Recovery going out to 2026, and you can see them free on our platform here.
Don’t forget that there may still be risks. For instance, we’ve identified 1 warning sign for Energy Recovery that you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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