Investors with a long-term horizong may find it valuable to assess Spark New Zealand Limited's (NZSE:SPK) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Spark New Zealand is currently performing.
Commentary On SPK's Past Performance
SPK's trailing twelve-month earnings (from 31 December 2019) of NZ$423m has jumped 19% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 2.4%, indicating the rate at which SPK is growing has accelerated. How has it been able to do this? Let's see whether it is solely a result of industry tailwinds, or if Spark New Zealand has experienced some company-specific growth.
In terms of returns from investment, Spark New Zealand has invested its equity funds well leading to a 30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the NZ Telecom industry of 6.6%, indicating Spark New Zealand has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Spark New Zealand’s debt level, has declined over the past 3 years from 21% to 19%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 51% to 120% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Spark New Zealand has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Spark New Zealand to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SPK’s future growth? Take a look at our free research report of analyst consensus for SPK’s outlook.
- Financial Health: Are SPK’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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