Investors Shouldn't Be Too Comfortable With Portland General Electric's (NYSE:POR) Earnings

Despite posting some strong earnings, the market for Portland General Electric Company's (NYSE:POR) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Portland General Electric

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Portland General Electric increased the number of shares on issue by 8.1% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. 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 Portland General Electric's historical EPS growth by clicking on this link.

How Is Dilution Impacting Portland General Electric's Earnings Per Share (EPS)?

Portland General Electric has improved its profit over the last three years, with an annualized gain of 28% in that time. In comparison, earnings per share only gained 10% over the same period. And at a glance the 37% gain in profit over the last year impresses. But in comparison, EPS only increased by 29% over the same period. 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 it will certainly be a positive for shareholders if Portland General Electric can grow EPS persistently. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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 Portland General Electric's Profit Performance

Portland General Electric 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 Portland General Electric's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 10% over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. 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. For example, Portland General Electric has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Portland General Electric's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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 with significant insider holdings 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.