On September 12, 2023, Joshua Ballard, the Chief Financial Officer (CFO) of Energy Recovery Inc (ERII, Financial), sold 700 shares of the company. This move is part of a larger trend of insider selling within the company over the past year.
Joshua Ballard has been with Energy Recovery Inc for several years, serving in various financial roles before becoming CFO. His deep understanding of the company's financial operations and strategic direction makes his stock transactions particularly noteworthy for investors.
Energy Recovery Inc is a global leader in pressure energy technology for industrial fluid flows. The company's technology harnesses underutilized pressure energy inherent in industrial processes and converts it into electricity or uses it in the same process, reducing energy costs for businesses.
Over the past year, Ballard has sold a total of 21,929 shares and has not purchased any shares. This trend is mirrored by other insiders within the company, with 21 insider sells and 0 insider buys over the same timeframe.
The insider's recent sell occurred when the shares of Energy Recovery Inc were trading at $24.03, giving the stock a market cap of $1.335 billion. The price-earnings ratio at this time was 131.50, significantly higher than the industry median of 21.73 and the company’s historical median price-earnings ratio. This suggests that the stock was overvalued at the time of the sale.
The GuruFocus Value, an intrinsic value estimate developed by GuruFocus, for Energy Recovery Inc was $20.56 at the time of the sale. This gives the stock a price-to-GF-Value ratio of 1.17, indicating that the stock was modestly overvalued.
The GF Value is calculated based on historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company’s past returns and growth, and future estimates of business performance from Morningstar analysts.
The insider's decision to sell shares could be interpreted in several ways. It could be a personal financial decision or it could be based on the insider's perception of the company's current valuation. Given the high price-earnings ratio and the stock's modest overvaluation according to the GF Value, it is possible that the insider believed that the stock was overpriced at the time of the sale.
However, investors should not base their investment decisions solely on insider transactions. It is important to consider a variety of factors, including the company's financial health, market conditions, and industry trends, when making investment decisions.
