Is IDACORP’s Recent 16.8% Price Rise Justified Amid Utility Policy Developments?

• Wondering if IDACORP is truly worth adding to your portfolio? You are not alone, and today's prices have many investors taking a closer look.
• The stock has seen some notable moves lately, rising 16.8% so far this year, even though it slipped 1.9% in the last week and is down 6.6% for the past month.
• Recently, IDACORP's share price has reacted to industry developments, including discussions on energy transition policies and regulatory updates in the utility sector. These news items have kept market sentiment active, presenting both potential upside and new risks to consider.
• At this point, IDACORP only scores 1 out of 6 on our undervalued checks, which makes it essential to examine how the market is really pricing in its fundamentals. We will break down several valuation techniques, and point you to a better approach at the end that could uncover the bigger picture.

IDACORP scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: IDACORP Dividend Discount Model (DDM) Analysis

The Dividend Discount Model (DDM) is a valuation method that estimates the intrinsic value of a stock by projecting its future dividend payments and discounting them back to today's value. This approach is particularly suitable for utility companies such as IDACORP, which have established track records of regular dividends.

For IDACORP, the model projects a dividend per share (DPS) of $3.81, with an anticipated annual growth rate in dividends of approximately 3.26%, based on capped forward-looking estimates. The company currently distributes just over 60% of its earnings as dividends, which suggests a balance between rewarding shareholders and retaining capital for future needs. With a return on equity of roughly 9.31%, IDACORP's dividend policy appears sustainable for the foreseeable future.

According to the DDM, the estimated intrinsic value of IDACORP is $103.21 per share. When this figure is compared to the actual share price, the model implies that the stock is trading at a 22.8% premium to its fair value. Therefore, viewed through a dividend-focused lens, IDACORP appears overvalued at this time.

Result: OVERVALUED

Our Dividend Discount Model (DDM) analysis suggests IDACORP may be overvalued by 22.8%. Discover 917 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for IDACORP.

Approach 2: IDACORP Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used to value profitable companies because it directly relates a company’s share price to its earnings, providing a clear sense of how much the market is willing to pay for each dollar of profit. For established and mature businesses like IDACORP, with reliable earnings, the PE ratio is a practical and widely accepted value yardstick.

A "normal" PE ratio varies depending on factors such as future earnings growth, company risks, and how investors perceive the stability of those profits. Companies with higher growth prospects or lower perceived risk typically command higher PE ratios. Those facing more challenges or slower growth often trade at a discount.

Currently, IDACORP trades at a PE ratio of 21.6x. This sits just below the average of its peer group at 22.4x and slightly above the electric utilities industry average of 20.5x. However, rather than simply comparing to peers or industry medians, the Simply Wall St "Fair Ratio" takes a more holistic approach. It considers important factors like IDACORP's earnings growth outlook, risk level, profit margins, industry backdrop, and market capitalization to generate a PE ratio that more closely reflects the company’s true fair value for investors. For IDACORP, this Fair Ratio is calculated at 19.6x, suggesting what a reasonable PE multiple should be given its specific profile.

Comparing the Fair Ratio of 19.6x to IDACORP’s actual PE of 21.6x, the stock appears to trade somewhat above its fair value, indicating a modest premium.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1423 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your IDACORP Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply a story or perspective you have about a company like IDACORP. It reflects where you believe it is headed and why, expressed through your own assumptions about future revenue, profit margins, and other key financial drivers. Narratives connect your view of IDACORP's business direction with actionable financial forecasts, which are then used to estimate a fair value for the stock. This approach makes your investment thesis personal, data-driven, and transparent.

This approach moves beyond relying on static valuation metrics and empowers you to make buy or sell decisions by continuously comparing your fair value to the latest share price. Narratives are quick to create and are integrated right within the Community page on Simply Wall St's platform, where millions of investors share and update their views. The tool automatically refreshes as new earnings reports or news come in, ensuring your Narrative stays relevant. For example, one investor might create a bullish Narrative for IDACORP, projecting robust electricity demand and a fair value of $140.88, while another could take a more conservative stance, highlighting regulatory headwinds and assigning a fair value closer to $103.21.

Do you think there's more to the story for IDACORP? Head over to our Community to see what others are saying!

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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