CommSec
30 Jan 2024
So you’ve decided to put some money to work in the sharemarket. Or at least you're thinking about it. Exciting times.
And there’s no better time than February to track how your new investments are panning out. That’s because it’s reporting season, or otherwise known as ‘profit-reporting season’ or ‘earnings season’.
Essentially, this is the time when many companies report on their financial performance, making all their latest results, key numbers and slide packs available to the public. Actually for larger companies, this occurs twice a year – February and August. One of the benefits of investing in the sharemarket is that companies are required to regularly open their books to the public.
No doubt if you have put your money in a particular stock or sector, (the latter could be investments in exchange traded funds – ETFs) you want to see if the value of your investment is growing in line with your expectations. So there is actually no better time to monitor the performance of the companies than now. And there are basically three things you want to find out:
- Is the company making a profit and how is this being achieved?
- What are the current challenges and opportunities for the company?
- What is the outlook for the business?
Now the mere mention of balance sheets or profit or loss accounts may get your head spinning. But you can immerse yourself in the figures as much as you are comfortable with. Broadly though, you are interested in assessing the financial health of the company.
Just as your doctor monitors your own health through things like blood tests, you check the financial health of a company by looking at indicators like profits, revenues, expenses and debt levels.
You are also probably interested in the sort of factors that have influenced the results – the operating environment, challenges, opportunities or special factors. Then you are no doubt keen to know where the company goes from here. And there is no better time to assess whether management is up to the task.
Now all this sounds a bit daunting. But no fear, whether you jump in the deep end or wade in the shallows, you can find the information you want.
CommSec analysts will keep you up-to-date with how some of the most widely-held companies have performed. Business media and websites will also be active in outlining the key factors behind company results.
So you won’t be alone – there will be no shortage of places to go to get the lowdown on how companies have performed.
Ultimately you are trying to determine whether the company is right for you. Because it will give you confidence that your wealth creation goals are going to be met. And if not, then you may make the decision to move on.
Most likely, you might come to that conclusion by looking at other company results. These firms may operate in the same or different sector. But the more you wade into the season, the more knowledge and skills you will likely gain.
Ultimately, well researched decisions may help you make more rewarding investments.
Happy Earnings Season!
