Took a quick look at Economic Recovery (ERII). Nice little company. From Yahoo, the company "engages in the design, development, manufacture, and sale of energy recovery devices for sea water reverse osmosis desalination worldwide. The company markets its energy recovery devices...to engineering and construction firms, and original equipment manufacturers." Like the space. Desalination holds tremendous potential in a water starved world where most of the globe's population lives within 200 miles of the coast. Company exhibits nice "leader" traits - high margins, strong growth, but it also exhibits the one thing I always struggle with with growth companies - a high valuation. The irrepressible laws of diminishing return inevitably weigh on high multiple assets. Because growth rates and margins are not sustainable ad infinitum in a competitive world (although analysts generally extrapolate them), multiple compression will inevitably set-in at some point. Fighting multiple compression even as growth continues to be cranked out, is ultimately a losers game - just look at any ex-growth stock (INTC, MSFT, YHOO, EBAY, etc.). The bottom line is that valuation counts. But this one is worth keeping an eye on - especially because it is so small and there is the potential there being a large opportunity.
Disclosure: No personal or professional position.
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