Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Energy Recovery (Nasdaq: ERII) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.
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- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 27.75% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- ENERGY RECOVERY INC has improved earnings per share by 22.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ENERGY RECOVERY INC continued to lose money by earning -$0.07 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings (-$0.03 versus -$0.07).
- The gross profit margin for ENERGY RECOVERY INC is currently very high, coming in at 77.32%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -94.50% is in-line with the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Machinery industry and the overall market, ENERGY RECOVERY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$5.94 million or 53.99% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.