Naspers Limited's (JSE:NPN) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?

Naspers (JSE:NPN) has had a rough three months with its share price down 27%. But if you pay close attention, you might find that its key financial indicators look quite decent, which could mean that the stock could potentially rise in the long-term given how markets usually reward more resilient long-term fundamentals. In this article, we decided to focus on Naspers' ROE. Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder's equity. 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. How Is ROE Calculated? The formula for ROE is: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Naspers is:24% = US$13b ÷ US$56b (Based on the trailing twelve months to September 2025). The 'return' is the profit over the last twelve months. So, this means that for every ZAR1 of its shareholder's investments, the company generates a profit of ZAR0.24. View our latest analysis for Naspers What Is The Relationship Between ROE And Earnings Growth? So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics. A Side By Side comparison of Naspers' Earnings Growth And 24% ROE At first glance, Naspers seems to have a decent ROE. Further, the company's ROE compares quite favorably to the industry average of 10%. For this reason, Naspers' five year net income decline of 13% raises the question as to why the high ROE didn't translate into earnings growth. We reckon that there could be some other factors at play here that are preventing the company's growth. For example, it could be that the company has a high payout ratio or the business has allocated capital poorly, for instance. So, as a next step, we compared Naspers' performance against the industry and were disappointed to discover that while the company has been shrinking its earnings, the industry has been growing its earnings at a rate of 6.3% over the last few years. JSE:NPN Past Earnings Growth February 15th 2026 Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Naspers fairly valued compared to other companies? These 3 valuation measures might help you decide. Is Naspers Making Efficient Use Of Its Profits? When we piece together Naspers' low three-year median payout ratio of 2.4% (where it is retaining 98% of its profits), calculated for the last three-year period, we are puzzled by the lack of growth. This typically shouldn't be the case when a company is retaining most of its earnings. So there could be some other explanations in that regard. For example, the company's business may be deteriorating. Moreover, Naspers has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 5.2% over the next three years. Consequently, the higher expected payout ratio explains the decline in the company's expected ROE (to 17%) over the same period. Summary In total, it does look like Naspers has some positive aspects to its business. Yet, the low earnings growth is a bit concerning, especially given that the company has a high rate of return and is reinvesting ma huge portion of its profits. By the looks of it, there could be some other factors, not necessarily in control of the business, that's preventing growth. With that said, we studied current analyst estimates and discovered that analysts expect the company's earnings growth to improve slightly. Sure enough, this could bring some relief to shareholders. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more. Valuation is complex, but we're here to simplify it.Discover if Naspers might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.Access Free Analysis