3 things I'm looking out for this reporting season

Here are 3 of the things I'm looking out for this reporting season.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Reporting season is going to truly get underway this week, and there are some things that I'm going to be keeping a lookout for.

We've already seen a few admissions that reporting season could be tough this year with domestic cyclical businesses potentially underperforming such as Adelaide Brighton Ltd. (ASX: ABC).

Here are three of the things I'm looking out for:

Profit margin growth

In my opinion the best businesses to own are ones that are profitability scalable. That means that as they become bigger they earn more profit from each additional dollar of revenue.

If a business has grown its revenue and its profit margin hasn't increased then it's likely something isn't going as well as it should – unless the business is investing for growth of course.

Most commonly, we see this increase of profitability through a growing earnings before interest, tax, depreciation and amortisation (EBITDA) and earnings before interest and tax (EBIT) margin.  

How will the high-flyers react?

There are many shares on the ASX priced for a lot of success, even before the recent impact of interest rate cuts by the RBA and US Federal Reserve sent share prices even higher.

I'm keen to see how the market is going to react to the undoubtedly impressive result to be announced by WiseTech Global Ltd (ASX: WTC), Appen Ltd (ASX: APX), Altium Limited (ASX: ALU), Afterpay Touch Group Ltd (ASX: APT), Xero Limited (ASX: XRO), Pro Medicus Limited (ASX: PME) and others.

Will they finally have a poor (reaction) in reporting season, or will those shares keep marching higher?

Management comments about the outlook and trading updates

There are now suggestions that we may be reaching a tipping point with construction approvals falling, unemployment rising and debt levels growing in Australia which could hurt growth.

However, a few negative statistics won't necessarily turn into a downturn. I'm interested to see what management say, what the short-term outlook for that business is and if they reveal any trading updates for July and August.

Foolish takeaway

I hope you have a successful reporting season and that your businesses report what you want them to. I expect it's going to be a very interesting reporting season as always.

Tristan Harrison owns shares of Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of WiseTech Global. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, Appen Ltd, and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Two brokers analysing stocks.
Broker Notes

Morgans names 2 ASX shares to buy and 2 to hold

Let's see what the broker is saying about these shares.

Read more »

Hand holding out coal in front of a coal mine.
Broker Notes

Up 379% in 5 years, are Whitehaven Coal shares now a buy, hold or sell?

Here’s what Macquarie is forecasting for Whitehaven Coal shares into 2026.

Read more »

Woman with gold nuggets on her hand.
Broker Notes

Expert tips further upside for this surging ASX 200 gold stock

How much fuel is left in the tank for this gold mining heavyweight?

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Share Market News

5 things to watch on the ASX 200 on Tuesday

It looks set to be a tough session for Aussie investors.

Read more »

happy solar panel installers, solar energy
Share Market News

How Wesfarmers shares could benefit from the latest Bunnings product expansion

Bunnings has a growth plan to charge its profit higher.

Read more »

share buyers, investors, happy investors
Opinions

Why it could be a great time to buy AFIC shares

I’m optimistic about the return potential for this investment company.

Read more »

a couple clink champagne glasses on board a private aircraft with gourmet food plates set in front of them. They are wearing designer clothes and looking wealthy.
Opinions

Why I'm aiming for $1 million with ASX shares

I think it makes a lot of sense to invest in stocks to achieve wealth goals.

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors started the week off in a good mood today.

Read more »