IDACORP's (NYSE:IDA) Solid Earnings May Rest On Weak Foundations

The recent earnings posted by IDACORP, Inc. (NYSE:IDA) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

Check out our latest analysis for IDACORP

In order to understand the potential for per share returns, it is essential to consider 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. Therefore, each share now receives a smaller portion of profit. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. Check out IDACORP's historical EPS growth by clicking on this link.

How Is Dilution Impacting IDACORP's Earnings Per Share (EPS)?

IDACORP has improved its profit over the last three years, with an annualized gain of 10% in that time. And over the last 12 months, the company grew its profit by 8.9%. On the other hand, earnings per share are only up 8.8% in that time. 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 IDACORP shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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. Therefore, it seems possible to us that IDACORP's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 9.7% per annum growth in EPS for the last three. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with IDACORP (including 1 which is significant).

This note has only looked at a single factor that sheds light on the nature of IDACORP's profit. But there are plenty of other ways to inform your opinion of a company. 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.