The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But IDACORP, Inc. (NYSE:IDA) has fallen short of that second goal, with a share price rise of 32% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 30% in the last year.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, IDACORP achieved compound earnings per share (EPS) growth of 6.2% per year. This EPS growth is reasonably close to the 6% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on IDACORP's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for IDACORP the TSR over the last 5 years was 51%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
IDACORP shareholders gained a total return of 34% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 9% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand IDACORP better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with IDACORP .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.
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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.
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