Novabase S.G.P.S., S.A. (FRA:NVQ) Is Up But Financials Look Inconsistent: Which Way Is The Stock Headed?

Simply Wall St

Wed, February 11, 2026 at 1:43 PM GMT+9 4 min read

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Novabase S.G.P.S’ (FRA:NVQ) stock is up by 6.9% over the past three months. However, the company’s financials look a bit inconsistent and market outcomes are ultimately driven by long-term fundamentals, meaning that the stock could head in either direction. Particularly, we will be paying attention to Novabase S.G.P.S’ ROE today.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How Do You Calculate Return On Equity?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Novabase S.G.P.S is:

16% = €9.0m ÷ €55m (Based on the trailing twelve months to June 2025).

The ‘return’ refers to a company’s earnings over the last year. Another way to think of that is that for every €1 worth of equity, the company was able to earn €0.16 in profit.

See our latest analysis for Novabase S.G.P.S

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. Depending on how much of these profits the company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.

A Side By Side comparison of Novabase S.G.P.S’ Earnings Growth And 16% ROE

At first glance, Novabase S.G.P.S seems to have a decent ROE. On comparing with the average industry ROE of 12% the company’s ROE looks pretty remarkable. For this reason, Novabase S.G.P.S’ five year net income decline of 3.0% raises the question as to why the high ROE didn’t translate into earnings growth. Therefore, there might be some other aspects that could explain this. For example, it could be that the company has a high payout ratio or the business has allocated capital poorly, for instance.

However, when we compared Novabase S.G.P.S’ growth with the industry we found that while the company’s earnings have been shrinking, the industry has seen an earnings growth of 9.5% in the same period. This is quite worrisome.

Story Continues  

DB:NVQ Past Earnings Growth February 11th 2026

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Novabase S.G.P.S fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Novabase S.G.P.S Efficiently Re-investing Its Profits?

Novabase S.G.P.S’ high three-year median payout ratio of 706% suggests that the company is depleting its resources to keep up its dividend payments, and this shows in its shrinking earnings. Paying a dividend higher than reported profits is not a sustainable move. To know the 3 risks we have identified for Novabase S.G.P.S visit our risks dashboard for free.

Additionally, Novabase S.G.P.S has paid dividends over a period of at least ten years, which means that the company’s management is determined to pay dividends even if it means little to no earnings growth.

Summary

In total, we’re a bit ambivalent about Novabase S.G.P.S’ performance. Despite the high ROE, the company has a disappointing earnings growth number, due to its poor rate of reinvestment into its business. So far, we’ve only made a quick discussion around the company’s earnings growth. You can do your own research on Novabase S.G.P.S and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.

Have feedback on this article? Concerned about the content? Get in touch** with us directly.**_ Alternatively, email editorial-team (at) simplywallst.com._

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.

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