IDACORP, Inc.'s (NYSE:IDA) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.
View our latest analysis for IDACORP
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, IDACORP increased the number of shares on issue by 6.5% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out IDACORP's historical EPS growth by clicking on this link.
How Is Dilution Impacting IDACORP's Earnings Per Share (EPS)?
As you can see above, IDACORP has been growing its net income over the last few years, with an annualized gain of 10% over three years. And in the last year the company managed to bump profit up by 8.9%. But in comparison, EPS only increased by 8.8% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.
In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if IDACORP can grow EPS persistently. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
Our Take On IDACORP's Profit Performance
IDACORP shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that IDACORP's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 9.7% per annum growth in EPS for the last three. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 3 warning signs for IDACORP (1 can't be ignored!) that we believe deserve your full attention.
This note has only looked at a single factor that sheds light on the nature of IDACORP's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.