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IDACORP, Inc. (NYSE:IDA) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, IDACORP issued 6.6% more new shares over the last year. That means its earnings are split among 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 IDACORP's historical EPS growth by clicking on this link.
A Look At The Impact Of IDACORP's Dilution On Its Earnings Per Share (EPS)
As you can see above, IDACORP has been growing its net income over the last few years, with an annualized gain of 22% over three years. And in the last year the company managed to bump profit up by 19%. On the other hand, earnings per share are only up 13% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.
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. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.
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. Nonetheless, it's still worth noting that its earnings per share have grown at 15% over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that IDACORP is showing 2 warning signs in our investment analysis and 1 of those is a bit concerning...