Portland General Electric’s (NYSE:POR) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from Portland General Electric Company (NYSE:POR) last week didn’t sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Portland General Electric issued 6.7% more new shares over the last year. As a result, its net income is now split between a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out Portland General Electric’s historical EPS growth by clicking on this link.

Portland General Electric has improved its profit over the last three years, with an annualized gain of 22% in that time. In contrast, earnings per share were actually down by 0.04% per year, in the exact same period. Net profit actually dropped by 12% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 17%. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Portland General Electric’s EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.

Over the last year Portland General Electric issued new shares and so, there’s a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Portland General Electric’s true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. At the end of the day, it’s essential to consider more than just the factors above, if you want to understand the company properly. If you’d like to know more about Portland General Electric as a business, it’s important to be aware of any risks it’s facing. Every company has risks, and we’ve spotted 3 warning signs for Portland General Electric (of which 1 is potentially serious!) 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. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to ‘follow the money’ and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.