Financial Analysis: Energy Recovery (NASDAQ:ERII) & Art’s-Way Manufacturing (NASDAQ:ARTW)

Art’s-Way Manufacturing (NASDAQ:ARTW) and Energy Recovery (NASDAQ:ERII) are both small-cap industrials companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, risk, dividends, institutional ownership and profitability.

Volatility and Risk

Art’s-Way Manufacturing has a beta of 0.97, indicating that its stock price is 3% less volatile than the S&P 500. Comparatively, Energy Recovery has a beta of 0.91, indicating that its stock price is 9% less volatile than the S&P 500.

Profitability

This table compares Art’s-Way Manufacturing and Energy Recovery’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Art’s-Way Manufacturing	-0.08%	-0.16%	-0.10%
Energy Recovery	12.72%	8.25%	7.24%

Institutional and Insider Ownership

2.9% of Art’s-Way Manufacturing shares are held by institutional investors. Comparatively, 83.6% of Energy Recovery shares are held by institutional investors. 51.5% of Art’s-Way Manufacturing shares are held by company insiders. Comparatively, 2.5% of Energy Recovery shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and price targets for Art’s-Way Manufacturing and Energy Recovery, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Art’s-Way Manufacturing	1	0	0	0	1.00
Energy Recovery	1	3	1	0	2.00

Energy Recovery has a consensus price target of $13.50, suggesting a potential upside of 74.87%. Given Energy Recovery’s stronger consensus rating and higher probable upside, analysts plainly believe Energy Recovery is more favorable than Art’s-Way Manufacturing.

Earnings and Valuation

This table compares Art’s-Way Manufacturing and Energy Recovery”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Art’s-Way Manufacturing	$22.98 million	0.64	$1.03 million	($0.01)	-282.00
Energy Recovery	$134.99 million	2.95	$22.96 million	$0.28	27.57

Energy Recovery has higher revenue and earnings than Art’s-Way Manufacturing. Art’s-Way Manufacturing is trading at a lower price-to-earnings ratio than Energy Recovery, indicating that it is currently the more affordable of the two stocks.

Summary

Energy Recovery beats Art’s-Way Manufacturing on 12 of the 14 factors compared between the two stocks.

About Art’s-Way Manufacturing

Art’s-Way Manufacturing Co., Inc. manufactures and distributes farm equipment products. It operates through the Agricultural Products, and Modular Buildings segments. The Agricultural Products segment manufactures a variety of specialized farm machinery under its own label including portable and stationary animal feed processing equipment and related attachments used to mill and mix feed grains into custom animal feed rations, a line of forage equipment consisting of forage boxes, bale processors, running gear, and dump boxes, a line of manure spreaders, sugar beet harvesting equipment, and a line of dirt work equipment. The Modular Buildings segment produces and sells modular buildings, which are custom designed to meet the specific research needs of its customers. It also provides services relating to the design, manufacturing, delivery, installation and renting of the building units that it produces. The company was founded by Arthur Luscombe in 1956 and is headquartered in Armstrong, IA.

About Energy Recovery

Energy Recovery, Inc., together with its subsidiaries, designs, manufactures, and sells energy efficiency technology solutions in the Americas, the Middle East, Africa, Asia, and Europe. The company operates through Water and Emerging Technologies segments. The company offers high and low pressure, and ultra pressure exchangers; AT and LPT hydraulic turbochargers; and high-pressure feed and circulation booster pumps for use in seawater and brackish desalination, and wastewater treatment. It also provides PX G1300, which reduces energy consumption and operating costs of carbon dioxide-based refrigeration systems; and spare parts, as well as repair, field, and commissioning services. It sells its products under the ERI, PX, Pressure Exchanger, PX Pressure Exchanger, Ultra PX, PX G, PX G1300, PX PowerTrain, AT, and Aquabold brands to original equipment manufacturers, supermarket chains, cold storage facilities, refrigeration system installers, and other industrial users; aftermarket customers consisting of desalination plant owners and operators; and project developers, end-users, and industry consultants, as well as engineering, procurement, and construction firms. Energy Recovery, Inc. was incorporated in 1992 and is headquartered in San Leandro, California.