Spark New Zealand Ltd

Spark New Zealand Ltd maintains a capital structure characterized by significant leverage, with long-term debt of NZD 2.37 billion against total equity of NZD 1.52 billion, resulting in a debt-to-equity ratio of 1.56. The company holds a current ratio of 1.35, indicating adequate short-term liquidity to cover immediate obligations, though the risk assessment flags medium liquidity risk due to negative net cash positions after accounting for total debt. Operating cash flow stands at NZD 680 million, which substantially exceeds free cash flow of NZD 98 million, reflecting heavy capital expenditure requirements of NZD 442 million to maintain and expand its network infrastructure.

Profitability metrics show a return on equity of 17.11% and a return on assets of 5.75%, suggesting efficient use of shareholder capital despite the asset-heavy nature of the business. The company generates NZD 3.69 billion in revenue, with a gross profit of NZD 1.89 billion, indicating a gross margin of approximately 51%. Operating income is NZD 465 million, leading to a net income of NZD 260 million. The valuation multiples include a price-to-earnings ratio of 13.81, a price-to-book ratio of 2.36, and an EV/EBITDA of 12.81, positioning the stock at a moderate premium relative to book value but with reasonable earnings multiples for the sector.

Revenue concentration is not explicitly detailed in segment or geographic breakdowns within the provided data, but the classification as a diversified telecommunications service provider implies a broad customer base across consumer and enterprise segments in New Zealand. The absence of specific segment data limits the ability to assess revenue concentration risks, but the diversified nature of the industry typically mitigates single-customer dependency.

Growth trajectory analysis is constrained by the absence of historical period data in the input. However, the current financial snapshot indicates a stable operational base with consistent cash flow generation. The company’s ability to sustain growth will depend on its capacity to manage capital expenditures while expanding high-margin digital services, as suggested by the significant gap between operating cash flow and free cash flow.

Risk factors include medium liquidity risk and low dilution risk, with key flags noting negative net cash after debt subtraction. The company’s reliance on debt financing exposes it to interest rate fluctuations, although the current ratio of 1.35 provides a buffer against short-term liquidity crunches. The low dilution risk suggests that the company is not actively issuing new shares, preserving existing shareholder value.

Recent events include analyst estimates with a mean price target of NZD 2.53 and a median target of NZD 2.40, indicating modest upside potential from the current market price of NZD 1.90. The mean recommendation of 2.57 suggests a neutral to slightly positive sentiment among analysts, with four buy ratings and two hold ratings, but no strong buy recommendations. This consensus reflects cautious optimism about the company’s ability to navigate its capital-intensive business model.

Free cash flow surged 137.5% year-over-year to NZD 98 million, demonstrating significant improvement in cash generation capabilities.

Net margin of 7.0% exceeds the cohort median, reflecting effective cost management and pricing power within the competitive landscape.

Cash conversion ratio of 2.62 is above the cohort median, highlighting strong ability to convert earnings into actual cash flow.

Debt-to-equity ratio of 1.56 is significantly below the cohort median of 0.34, indicating elevated financial leverage and credit risk.

Long-term debt increased to NZD 2.37 billion in FY2025, exacerbating financial obligations and potential interest burden on the balance sheet.

Revenue contracted 0.6% year-over-year to NZD 3.69 billion, indicating stagnation in top-line growth within the telecommunications market.

Revenue NZD 3.69B, −0,7% YoY; Operating income −25,1% YoY.

• ▍Revenue NZD 3.69B, −0,7% YoY
• ▍Operating income −25,1% YoY
• ▍Net income −17,7% YoY
• ▍Free cash flow +137,6% YoY
• ▍Net margin 7.0%

Revenue NZD 3.72B, −4,0% YoY; Operating income −49,1% YoY.

• ▍Revenue NZD 3.72B, −4,0% YoY
• ▍Operating income −49,1% YoY
• ▍Net income −72,2% YoY
• ▍Free cash flow −138,8% YoY
• ▍Net margin 8.5%

Revenue NZD 3.88B, +4,9% YoY; Operating income +93,8% YoY.

• ▍Revenue NZD 3.88B, +4,9% YoY
• ▍Operating income +93,8% YoY
• ▍Net income +176,8% YoY
• ▍Free cash flow +1 100,0% YoY
• ▍Net margin 29.3%

Revenue NZD 3.69B, +3,6% YoY; Operating income +4,8% YoY.

• ▍Revenue NZD 3.69B, +3,6% YoY
• ▍Operating income +4,8% YoY
• ▍Net income +6,8% YoY
• ▍Free cash flow −71,4% YoY
• ▍Net margin 11.1%

Revenue NZD 3.57B; Operating income NZD 600.0M.

• ▍Revenue NZD 3.57B
• ▍Operating income NZD 600.0M
• ▍Net margin 10.8%