Latest news with #SparkNewZealand
Yahoo
23-05-2025
- Business
- Yahoo
Returns On Capital Signal Difficult Times Ahead For Spark New Zealand (NZSE:SPK)
When researching a stock for investment, what can tell us that the company is in decline? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. And from a first read, things don't look too good at Spark New Zealand (NZSE:SPK), so let's see why. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Spark New Zealand: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.13 = NZ$476m ÷ (NZ$4.9b - NZ$1.2b) (Based on the trailing twelve months to December 2024). So, Spark New Zealand has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Telecom industry average of 10% it's much better. Check out our latest analysis for Spark New Zealand Above you can see how the current ROCE for Spark New Zealand compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Spark New Zealand for free. In terms of Spark New Zealand's historical ROCE movements, the trend doesn't inspire confidence. Unfortunately the returns on capital have diminished from the 19% that they were earning five years ago. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Companies that exhibit these attributes tend to not be shrinking, but they can be mature and facing pressure on their margins from competition. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Spark New Zealand becoming one if things continue as they have. In summary, it's unfortunate that Spark New Zealand is generating lower returns from the same amount of capital. Investors haven't taken kindly to these developments, since the stock has declined 28% from where it was five years ago. With underlying trends that aren't great in these areas, we'd consider looking elsewhere. Spark New Zealand does have some risks, we noticed 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
08-05-2025
- Business
- Yahoo
Spark New Zealand (NZSE:SPK) earnings and shareholder returns have been trending downwards for the last three years, but the stock climbs 3.4% this past week
For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Spark New Zealand Limited (NZSE:SPK) shareholders, since the share price is down 55% in the last three years, falling well short of the market decline of around 9.4%. The more recent news is of little comfort, with the share price down 50% in a year. Furthermore, it's down 26% in about a quarter. That's not much fun for holders. The recent uptick of 3.4% could be a positive sign of things to come, so let's take a look at historical fundamentals. Our free stock report includes 4 warning signs investors should be aware of before investing in Spark New Zealand. Read for free now. While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. Spark New Zealand saw its EPS decline at a compound rate of 23% per year, over the last three years. So do you think it's a coincidence that the share price has dropped 23% per year, a very similar rate to the EPS? We don't. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share. The image below shows how EPS has tracked over time (if you click on the image you can see greater detail). NZSE:SPK Earnings Per Share Growth May 8th 2025 It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Spark New Zealand's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further. What About Dividends? When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Spark New Zealand, it has a TSR of -43% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
Yahoo
23-04-2025
- Business
- Yahoo
Are Investors Undervaluing Spark New Zealand Limited (NZSE:SPK) By 46%?
The projected fair value for Spark New Zealand is NZ$3.86 based on 2 Stage Free Cash Flow to Equity Spark New Zealand is estimated to be 46% undervalued based on current share price of NZ$2.07 Analyst price target for SPK is NZ$2.96 which is 23% below our fair value estimate How far off is Spark New Zealand Limited (NZSE:SPK) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (NZ$, Millions) NZ$407.0m NZ$331.2m NZ$307.5m NZ$331.5m NZ$300.1m NZ$298.3m NZ$299.9m NZ$303.9m NZ$309.5m NZ$316.5m Growth Rate Estimate Source Analyst x3 Analyst x3 Analyst x3 Analyst x2 Analyst x2 Est @ -0.58% Est @ 0.54% Est @ 1.32% Est @ 1.87% Est @ 2.25% Present Value (NZ$, Millions) Discounted @ 6.6% NZ$382 NZ$291 NZ$254 NZ$257 NZ$218 NZ$203 NZ$192 NZ$182 NZ$174 NZ$167 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = NZ$2.3b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 3.2%. We discount the terminal cash flows to today's value at a cost of equity of 6.6%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = NZ$317m× (1 + 3.2%) ÷ (6.6%– 3.2%) = NZ$9.4b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= NZ$9.4b÷ ( 1 + 6.6%)10= NZ$5.0b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is NZ$7.3b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Relative to the current share price of NZ$2.1, the company appears quite undervalued at a 46% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Spark New Zealand as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 6.6%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. See our latest analysis for Spark New Zealand Strength Debt is well covered by earnings and cashflows. Dividend is in the top 25% of dividend payers in the market. Weakness Earnings declined over the past year. Opportunity Annual earnings are forecast to grow for the next 3 years. Trading below our estimate of fair value by more than 20%. Significant insider buying over the past 3 months. Threat Dividends are not covered by earnings and cashflows. Annual earnings are forecast to grow slower than the New Zealander market. Whilst important, the DCF calculation is only one of many factors that you need to assess for a company. It's not possible to obtain a foolproof valuation with a DCF model. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For Spark New Zealand, there are three important aspects you should further research: Risks: Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Spark New Zealand (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process. Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for SPK's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NZSE every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
Yahoo
29-03-2025
- Business
- Yahoo
A Closer Look At Spark New Zealand Limited's (NZSE:SPK) Impressive ROE
One of the best investments we can make is in our own knowledge and skill set. With that in mind, this article will work through how we can use Return On Equity (ROE) to better understand a business. By way of learning-by-doing, we'll look at ROE to gain a better understanding of Spark New Zealand Limited (NZSE:SPK). Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors' money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. The formula for ROE is: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Spark New Zealand is: 14% = NZ$194m ÷ NZ$1.4b (Based on the trailing twelve months to December 2024). The 'return' is the income the business earned over the last year. So, this means that for every NZ$1 of its shareholder's investments, the company generates a profit of NZ$0.14. View our latest analysis for Spark New Zealand One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. As is clear from the image below, Spark New Zealand has a better ROE than the average (11%) in the Telecom industry. That's clearly a positive. However, bear in mind that a high ROE doesn't necessarily indicate efficient profit generation. Especially when a firm uses high levels of debt to finance its debt which may boost its ROE but the high leverage puts the company at risk. You can see the 4 risks we have identified for Spark New Zealand by visiting our risks dashboard for free on our platform here. Companies usually need to invest money to grow their profits. That cash can come from issuing shares, retained earnings, or debt. In the first two cases, the ROE will capture this use of capital to grow. In the latter case, the use of debt will improve the returns, but will not change the equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same. Spark New Zealand does use a high amount of debt to increase returns. It has a debt to equity ratio of 1.30. While its ROE is pretty respectable, the amount of debt the company is carrying currently is not ideal. Investors should think carefully about how a company might perform if it was unable to borrow so easily, because credit markets do change over time. Return on equity is a useful indicator of the ability of a business to generate profits and return them to shareholders. A company that can achieve a high return on equity without debt could be considered a high quality business. All else being equal, a higher ROE is better. But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. The rate at which profits are likely to grow, relative to the expectations of profit growth reflected in the current price, must be considered, too. So I think it may be worth checking this free report on analyst forecasts for the company. Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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. Sign in to access your portfolio
Yahoo
13-03-2025
- Business
- Yahoo
Spark New Zealand Limited (NZSE:SPK) most popular amongst retail investors who own 52% of the shares, institutions hold 48%
The considerable ownership by retail investors in Spark New Zealand indicates that they collectively have a greater say in management and business strategy The top 25 shareholders own 44% of the company Insiders have bought recently To get a sense of who is truly in control of Spark New Zealand Limited (NZSE:SPK), it is important to understand the ownership structure of the business. With 52% stake, retail investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn). And institutions on the other hand have a 48% ownership in the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Let's delve deeper into each type of owner of Spark New Zealand, beginning with the chart below. Check out our latest analysis for Spark New Zealand Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices. Spark New Zealand already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Spark New Zealand's historic earnings and revenue below, but keep in mind there's always more to the story. We note that hedge funds don't have a meaningful investment in Spark New Zealand. Our data shows that JPMorgan Chase & Co, Private Banking and Investment Banking Investments is the largest shareholder with 8.2% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.9% and 5.2% of the stock. On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest. While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily. The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it. I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions. Our data suggests that insiders own under 1% of Spark New Zealand Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own NZ$3.6m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling. The general public -- including retail investors -- own 52% of Spark New Zealand. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio. It's always worth thinking about the different groups who own shares in a company. But to understand Spark New Zealand better, we need to consider many other factors. Be aware that Spark New Zealand is showing 4 warning signs in our investment analysis , and 1 of those is concerning... If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future. NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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. Sign in to access your portfolio
