Discounted Cash Flow (DCF) Analysis Levered

Energy Recovery, Inc. (ERII)

$25.29

+1.08 (+4.46%)

All numbers are in Millions, Currency in USD

Stock DCF: 3.09 | 25.29 | overvalue

Free Cash Flow

Year A/P	2018 Actual	2019 Actual	2020 Actual	2021 Actual	2022 Actual	2023 Projected	2024 Projected	2025 Projected	2026 Projected	2027 Projected
Revenue	74.52	86.94	118.99	103.90	125.59	144.97	167.35	193.17	222.98	257.40
Revenue (%)
Operating Cash Flow	7.56	5.27	16.87	13.53	12.63	15.50	17.89	20.66	23.84	27.52
Operating Cash Flow (%)
Capital Expenditure	-5.23	-7.38	-6.79	-6.68	-4.23	-8.99	-10.38	-11.98	-13.83	-15.97
Capital Expenditure (%)
Free Cash Flow	2.33	-2.11	10.08	6.85	8.40	6.51	7.51	8.67	10.01	11.56

Weighted Average Cost Of Capital

Share price	$ 25.29
Beta	1.201
Diluted Shares Outstanding	57.64
Cost of Debt
Tax Rate	7.76
After-tax Cost of Debt	5.63%
Risk-Free Rate
Market Risk Premium
Cost of Equity	9.361
Total Debt	14.88
Total Equity	1,457.74
Total Capital	1,472.62
Debt Weighting	1.01
Equity Weighting	98.99
Wacc

Build Up Free Cash Flow

Year A/P	2018 Actual	2019 Actual	2020 Actual	2021 Actual	2022 Actual	2023 Projected	2024 Projected	2025 Projected	2026 Projected	2027 Projected
Revenue	74.52	86.94	118.99	103.90	125.59	144.97	167.35	193.17	222.98	257.40
Operating Cash Flow	7.56	5.27	16.87	13.53	12.63	15.50	17.89	20.66	23.84	27.52
Capital Expenditure	-5.23	-7.38	-6.79	-6.68	-4.23	-8.99	-10.38	-11.98	-13.83	-15.97
Free Cash Flow	2.33	-2.11	10.08	6.85	8.40	6.51	7.51	8.67	10.01	11.56
WACC
PV LFCF						5.95	6.29	6.64	7.01	7.40
SUM PV LFCF										33.29

Terminal Value

Growth in perpetuity method:
Long-term growth rate
WACC (%)	9.32
Free cash flow (t + 1)	11.79
Terminal Value	161.03
Present Value of Terminal Value	103.14

Intrinsic Value

Enterprise Value	136.43
Net Debt	-41.48
Equity Value	177.90
Shares Outstanding	57.64
Equity Value Per Share	3.09