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Spark New Zealand (NZSE:SPK) Stock Can Cash Flow Close Its Valuation Gap?

Simply Wall St · 1d ago

Spark New Zealand stock went into this result on a tear, up around 17% over the past month and about 9% over three months, with investors clearly re‑rating the story. The company then printed a full year net profit margin of 12.3% and a trailing P/E of 8.4x, which sits well below global telecom peers. That gap between a richer share price and still low multiple is the real headline. Short term traders are reacting to the bounce, while long term holders are weighing whether the profit margin shift is durable enough to close that valuation discount.

Love the rebound in Spark New Zealand and its 12.3% net profit margin, but unsure how to think about a stock on an 8.4x P/E that still trades at a discount to global peers? Compare it with our 271 high quality undervalued stocks.

FY 2026 Earnings Summary

  • Revenue (FY 2026 vs. FY 2025): NZ$3,949m vs. NZ$3,725m (up 6.0%)
  • Net Income from Continuing Operations (FY 2026 vs. FY 2025): NZ$486m vs. NZ$252m (up 92.9%)
  • Basic EPS (FY 2026 vs. FY 2025): NZ$0.257142 vs. NZ$0.136437 (up 88.5%)
  • Net Profit Margin (Last 12 Months vs. Prior 12 Months): 12.3% vs. 6.8% (material improvement in profitability)

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NZSE:SPK Trailing 12-Month Earnings & Revenue History as at Aug 2026
NZSE:SPK Trailing 12-Month Earnings & Revenue History as at Aug 2026

Spark NZ bull case hinges on cash and mobile

Bulls argue that Spark New Zealand’s refocus on core connectivity, plus cost and efficiency work, should turn mobile leadership into stronger earnings and cash generation. The FY26 numbers partly validate that. Mobile service revenue returned to growth at NZ$998m and ARPU in consumer and SME rose about 3.6% even while connections stayed broadly flat. Market share losses in mobile slowed, and Spark still holds the top position by service revenue share. On the efficiency side, productivity benefits reached NZ$40m in FY26, with NZ$101m saved since FY24 against a NZ$150m to NZ$180m FY30 target. Free cash flow rose to NZ$308m and fully covered the NZ$0.16 per share dividend. Net debt fell after the data center sale. These are real milestones, although adjusted EBITDA at NZ$1.035b still edged down, so the earnings uplift case is not fully proven yet.

Bear case tests on margins, legacy drag and review

The bear narrative focuses on margin pressure, legacy revenue decline and uncertainty around Digital Services. The FY26 print gives those concerns some backing. Adjusted EBITDA slipped 2.4% to NZ$1.035b despite productivity gains, reflecting mix shift away from higher margin legacy voice and fewer months of data center contribution. Business connectivity revenue fell about 9.9% and broadband connections declined 4.9% in a very price competitive market. Digital Services revenue eased 3.4% to NZ$372m and is now classified as “beyond the core” with a formal review that may or may not lead to a transaction. That reinforces the idea that this unit is not pulling its weight yet. On the other hand, adjusted NPAT of NZ$225m was broadly flat and free cash flow grew, which tempers fears of immediate financial stress and supports the reset dividend at the current NZ$0.16 per share level.

See how Spark New Zealand’s higher net profit margin, mobile service gains and cash generation compare with market expectations with the consensus price target analysis for Spark New Zealand.

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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.