IDACORP (NYSE:IDA) Has Some Way To Go To Become A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at IDACORP (NYSE:IDA) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for IDACORP:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.037 = US$318m ÷ (US$9.1b - US$606m) (Based on the trailing twelve months to September 2024).

Thus, IDACORP has an ROCE of 3.7%. In absolute terms, that's a low return and it also under-performs the Electric Utilities industry average of 4.8%.

Check out our latest analysis for IDACORP

Above you can see how the current ROCE for IDACORP compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering IDACORP for free.

How Are Returns Trending?

The returns on capital haven't changed much for IDACORP in recent years. Over the past five years, ROCE has remained relatively flat at around 3.7% and the business has deployed 37% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line

As we've seen above, IDACORP's returns on capital haven't increased but it is reinvesting in the business. And with the stock having returned a mere 30% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

On a final note, we found 3 warning signs for IDACORP (1 can't be ignored) you should be aware of.

While IDACORP may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.