U.S. Markets closed
  • S&P Futures

    3,902.00
    +4.25 (+0.11%)
     
  • Dow Futures

    31,241.00
    +39.00 (+0.12%)
     
  • Nasdaq Futures

    11,838.00
    -40.25 (-0.34%)
     
  • Russell 2000 Futures

    1,771.50
    -3.40 (-0.19%)
     
  • Crude Oil

    110.35
    +0.46 (+0.42%)
     
  • Gold

    1,845.10
    +3.90 (+0.21%)
     
  • Silver

    21.87
    -0.03 (-0.13%)
     
  • EUR/USD

    1.0562
    -0.0026 (-0.2429%)
     
  • 10-Yr Bond

    2.7870
    -0.0680 (-2.38%)
     
  • Vix

    29.43
    +0.08 (+0.27%)
     
  • GBP/USD

    1.2495
    +0.0020 (+0.1587%)
     
  • USD/JPY

    127.8500
    +0.0560 (+0.0438%)
     
  • BTC-USD

    29,152.49
    -1,046.92 (-3.47%)
     
  • CMC Crypto 200

    650.34
    -23.03 (-3.42%)
     
  • FTSE 100

    7,389.98
    +87.24 (+1.19%)
     
  • Nikkei 225

    26,739.03
    +336.19 (+1.27%)
     

Has IDACORP (NYSE:IDA) Got What It Takes To Become A Multi-Bagger?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating IDACORP (NYSE:IDA), we don't think it's current trends fit the mold of a multi-bagger.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for IDACORP, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.044 = US$298m ÷ (US$7.1b - US$288m) (Based on the trailing twelve months to December 2020).

So, IDACORP has an ROCE of 4.4%. Even though it's in line with the industry average of 4.5%, it's still a low return by itself.

View our latest analysis for IDACORP

roce
roce

Above you can see how the current ROCE for IDACORP compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for IDACORP.

So How Is IDACORP's ROCE Trending?

Over the past five years, IDACORP's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect IDACORP to be a multi-bagger going forward. On top of that you'll notice that IDACORP has been paying out a large portion (63%) of earnings in the form of dividends to shareholders. If the company is in fact lacking growth opportunities, that's one of the viable alternatives for the money.

The Key Takeaway

We can conclude that in regards to IDACORP's returns on capital employed and the trends, there isn't much change to report on. And investors may be recognizing these trends since the stock has only returned a total of 39% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

If you want to continue researching IDACORP, you might be interested to know about the 1 warning sign that our analysis has discovered.

While IDACORP may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.