ERII
Energy Recovery, Inc.
$6.79
Platform & Compounding FCF
50%
Two-stage FCF DCF
Moderate
·
Conviction
Fair Value
Trading 16.1% below fair value
You pay
$6.79
Bear
$5.72
Fair
$8.09
Bull
$10.69
Bear
$5.72
-15.7%
9% stage 1 growth, 11% discount
Fair
$8.09
+19.2%
14% stage 1 growth, 11% discount
Bull
$10.69
+57.5%
19% stage 1 growth, 11% discount
Adjust Assumptions
14.3%
11.0%
3.0%
Key Value Driver
FCF growth rate (14% base case)
Terminal Value % of EV
42%
Implied Market Multiple
24.1x
Market is pricing in (growth)
11.5%
vs 14.3% base
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (16 analysts)
$10.00
Divergence from AlphaVal
19%
Summary
Using a two-stage FCF DCF with 14% growth decelerating over 15 years, discounted at 11%, the base-case intrinsic value is $8.09 per share.
Warnings
Stock-based employee pay equals 34% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions