What is reporting season?
Publicly traded companies have a number of obligations to their shareholders, one being financial transparency. Companies listed on the ASX are required to share their earnings, results and forecasts, as well as any new initiatives and plans they have for the future with shareholders. And reporting season is when the latest earning reports and profit results are released.
When reporting season in Australia?
It is mandatory for companies to share their financial reports twice a year, within two months of their balance sheet ending. Typically balance sheets end on June 30, therefore full-year results come out in August and half-year results are generally available in February. Keep in mind, not every company shares their reports at this time, as balance sheet end dates vary. So, it’s a good idea to check the company’s website for their release dates.
Related article: ASX Reporting Season Calendar 2021
Why is reporting season important for investors?
Reporting season is a great time to gather the most up-to-date information and assess the financial health and direction of a company, which in turn can help inform your decision making.
Most companies will share several documents with the public to help investors analyse and assess the information. The full or half year results are typically where the bulk of the financial information can be found, and some companies choose to share their annual report at the same time. It is also not unheard of for companies to deliver a results presentation to analysts and the media during reporting season.
It is also worth noting, when reporting season takes place as it can cause volatility within the market. Companies may over or underperform what market analysts have predicted and this can lead to a shift in share price.
What should investors look for in the financials statements?
At times the amount of information provided can be overwhelming, however, there are a few things you can look for and questions you can ask when assessing the results.
Earnings – profit and loss
- How much of the company’s goods and services they have sold recently?
Dividend payment to shareholders
- Is the company providing dividends to its shareholders? When a company distributes dividends to shareholders it is sometimes seen as a positive sign for the company’s financial health.
- What are the company’s goals and plans for the future, and will this lead to growth?
Asking questions like this and pairing it with additional research can help you get the most out of the reports.
Related article – How to get the most from reading an annual report
Additionally, astute investors will use various financial ratios to help make sense of the numbers. Financial ratios are used to compare a company to its peers and to the benchmark of an industry. Ratios can help put the numbers into context and provide a more accurate assessment of a company and it’s financial performance.
Learn more about financial ratios here.
Are the financial statements all you need?
Before investing in a company is it always a good idea to really know what you are investing in and understanding the financials is a big part of that. However, it is just as important to be across what the company does, how they make their money, their place in the wider market and plans for future growth. Taking into consideration all aspects can help investors build a clearer picture of a company. It is also important to remember that past performance is not an indicator of future performance, therefore, it cannot be relied upon solely.
Main image source: ktasimar (Shutterstock.com)
If you’re comparing Online Share Trading companies, the comparison table below displays some of the companies available on Canstar’s database with links to the company’s website. The information displayed is based on an average of 6 trades per month. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical). Use Canstar’s Online Share Trading comparison selector to view a wider range of Online Share Trading companies.