Stock Analysis
Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Avista Corporation (NYSE:AVA) shareholders have had that experience, with the share price dropping 22% in three years, versus a market return of about 27%. More recently, the share price has dropped a further 10% in a month.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Avista
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Avista saw its EPS decline at a compound rate of 16% per year, over the last three years. This fall in the EPS is worse than the 8% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Avista's key metrics by checking this interactive graph of Avista's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Avista the TSR over the last 3 years was -12%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While it's never nice to take a loss, Avista shareholders can take comfort that , including dividends,their trailing twelve month loss of 5.6% wasn't as bad as the market loss of around 11%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 0.8% over the last half decade. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 4 warning signs for Avista you should be aware of, and 2 of them are a bit unpleasant.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
What are the risks and opportunities for Avista?
Avista Corporation, together with its subsidiaries, operates as an electric and natural gas utility company.
Rewards
Earnings are forecast to grow 7.34% per year
Earnings have grown 1.6% per year over the past 5 years
Risks
Interest payments are not well covered by earnings
Shareholders have been diluted in the past year
Significant insider selling over the past 3 months
Large one-off items impacting financial results
Further research on
Avista
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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.
About NYSE:AVA
Avista
Avista Corporation, together with its subsidiaries, operates as an electric and natural gas utility company.
Average dividend payer with questionable track record.
