Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, Energy Recovery's Probability of Financial Distress (%) is 0.05%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Energy Recovery (NAS:ERII) Probability of Financial Distress (%) Explanation
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk in the upcoming year. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Energy Recovery Probability of Financial Distress (%) Related Terms
ERII vs ARQ, FTEK, BCHT: Probability of Financial Distress (%) Comparison
For the Pollution & Treatment Controls subindustry, Energy Recovery's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Energy Recovery Probability of Financial Distress (%) vs Industrial Products Industry
For the Industrial Products industry and Industrials sector, Energy Recovery's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where Energy Recovery's Probability of Financial Distress (%) falls into.
Energy Recovery Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
LPFD
=
-20.12 * NIMTAAVG
+
1.60 * TLMTA
-
7.88 * EXRETAVG
+
1.55 * SIGMA
-
0.005 * RSIZE
-
2.27 * CASHMTA
+
0.070 * MB
-
0.09 * PRICE
-
8.87
=
-7.69
The Probability of Financial Distress (%) (PFD) was then obtianed by:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
What does a Probability of Financial Distress (%) of 0.05% mean?
Energy Recovery (ERII) has a Probability of Financial Distress (%) of 0.05% as of Jun. 24, 2026.
Is Energy Recovery's Probability of Financial Distress (%) too high?
Energy Recovery's current Probability of Financial Distress (%) is 0.05%. Overall, Energy Recovery has a GF Score™ of 71/100 and is considered Significantly Undervalued, reflecting its overall financial health beyond just this single metric.
How does Energy Recovery's Probability of Financial Distress (%) compare to ARQ and FTEK?
Energy Recovery's Probability of Financial Distress (%) of 0.05% can be compared against companies in the Industrial Products industry. See the competitive comparison table and distribution chart on this page for a detailed peer-by-peer breakdown.
What is a good Probability of Financial Distress (%) for an Industrial Products company?
A good Probability of Financial Distress (%) depends on the Industrial Products industry context. However, Probability of Financial Distress (%) should not be evaluated in isolation — investors should consider it alongside profitability, growth, and financial strength metrics. Use the industry distribution chart on this page to see where any company falls relative to its peers.
What does a high Probability of Financial Distress (%) mean?
A high Probability of Financial Distress (%) can signal that a stock is expensive relative to its fundamentals. Energy Recovery's current Probability of Financial Distress (%) is 0.05%. However, context matters — high-growth companies often justify higher valuations. Always evaluate alongside other metrics like GF Score™ and GF Value™.
Is Energy Recovery stock overvalued right now?
Based on GuruFocus' analysis, Energy Recovery (ERII) is currently considered Significantly Undervalued. The stock's GF Value™ is $14.81, compared to a current price of $8.77 — trading 40.8% below its estimated fair value. The current Probability of Financial Distress (%) is 0.05%. Energy Recovery's overall GF Score™ is 71/100 with 5 warning signs to review. Investors should evaluate multiple metrics — including profitability, growth, and financial strength — before making a decision.
How is Probability of Financial Distress (%) calculated?
Probability of Financial Distress (%) is calculated from a company's financial statements. For Energy Recovery (ERII), the current Probability of Financial Distress (%) is 0.05% as of Jun. 24, 2026. GuruFocus calculates this using data sourced from SEC filings and annual reports. See the calculation section and 30-year financial data on this page for the full breakdown.
Is Energy Recovery (ERII) Overvalued in 2026?
Based on GuruFocus' analysis, Energy Recovery stock appears to be undervalued.
The current stock price of $8.77 is trading 40.8% below its estimated GF Value™ of $14.81.
GuruFocus considers Energy Recovery to be Significantly Undervalued.
Key valuation signals for ERII:
Probability of Financial Distress (%): 0.05%
GF Value™: $14.81 vs. price of $8.77 (40.8% below fair value)
No single metric tells the full story. See the ERII stock analysis page for a complete view including 30-year financials, guru trades, and insider activity.
Energy Recovery Inc designs and manufactures energy-saving technologies. The firm uses its proprietary pressure exchanger technology to help customers in multiple industries improve their operations and lower their emissions. Using its proprietary technology, it offers energy recovery devices, including pressure exchangers, pumps, and turbochargers, mainly used for seawater desalination and wastewater treatment. Additionally, the company is involved in the development of emerging technologies, such as the PX G1300 used in industrial and commercial refrigeration applications. The firm's reportable operating segments are: Water, which generates maximum revenue, and Emerging Technologies. Geographically, it generates maximum revenue from the Middle East, and the rest from other markets.
71GF Score
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Probability of Financial Distress (%) is just one metric. See GF Value™, 30-year financials, guru trades, warning signs, and more.
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