Enviri (NVRI)

Steel and waste handling company Enviri (NYSE:NVRI) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 8.7% year on year to $548.3 million. Its non-GAAP loss of $0.18 per share was 15.6% above analysts’ consensus estimates.

Company Overview

Cooling America’s first indoor ice rink in the 19th century, Enviri (NYSE:NVRI) offers steel and waste handling services.

Waste management companies can possess licenses permitting them to handle hazardous materials. Furthermore, many services are performed through contracts and statutorily mandated, non-discretionary, or recurring, leading to more predictable revenue streams. However, regulation can be a headwind, rendering existing services obsolete or forcing companies to invest precious capital to comply with new, more environmentally-friendly rules. Lastly, waste management companies are at the whim of economic cycles. Interest rates, for example, can greatly impact industrial production or commercial projects that create waste and byproducts.

Competitors offering similar products include Waste Management (NYSE:WM), Clean Harbors (NYSE:CLH), and Schnitzer Steel (NASDAQ:SCHN).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Enviri’s sales grew at a decent 7.8% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Enviri’s annualized revenue growth of 7.1% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Enviri missed Wall Street’s estimates and reported a rather uninspiring 8.7% year-on-year revenue decline, generating $548.3 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Enviri has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 18.9% gross margin over the last five years. Said differently, Enviri had to pay a chunky $81.07 to its suppliers for every $100 in revenue.

This quarter, Enviri’s gross profit margin was 22.7%, marking a 2.4 percentage point increase from 20.3% in the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Enviri was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.7% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Enviri’s operating margin decreased by 1.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Enviri’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Enviri generated an operating profit margin of 5.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Enviri, its EPS declined by 17.3% annually over the last five years while its revenue grew by 7.8%. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into Enviri’s earnings to better understand the drivers of its performance. As we mentioned earlier, Enviri’s operating margin was flat this quarter but declined by 1.3 percentage points over the last five years. Its share count also grew by 2%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Enviri, its two-year annual EPS declines of 380% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Enviri reported EPS at negative $0.18, up from negative $0.21 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Enviri’s full-year EPS of negative $0.21 will reach break even.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Enviri’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 2%, meaning it lit $1.95 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Enviri’s margin expanded by 2.8 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise.

Enviri burned through $15.02 million of cash in Q1, equivalent to a negative 2.7% margin. The company’s cash burn was similar to its $25.53 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Enviri historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.4%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Enviri’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Enviri burned through $48.02 million of cash over the last year, and its $1.58 billion of debt exceeds the $102.5 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Enviri’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Enviri until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were glad Enviri's EPS outperformed Wall Street’s estimates. On the other hand, its revenue missed significantly and its EBITDA guidance for next quarter fell short of Wall Street’s estimates. Overall, this print wasn't all bad, but it was weak nonetheless. The stock remained flat at $6.90 immediately after reporting.

Updated: May 22, 2025 at 11:33 PM EDT

Before making an investment decision, investors should account for Enviri’s business fundamentals and valuation in addition to what happened in the latest quarter.

We see the value of companies helping their customers, but in the case of Enviri, we’re out. Although its revenue growth was decent over the last five years, it’s expected to deteriorate over the next 12 months and its relatively low ROIC suggests management has struggled to find compelling investment opportunities. And while the company’s rising cash profitability gives it more optionality, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets.

Enviri’s EV-to-EBITDA ratio based on the next 12 months is 2.5x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $14.33 on the company (compared to the current share price of $7.66).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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