Reporting season is the period of time during which a large number of publicly traded companies release their quarterly financial reports. In general, there exists two large reporting seasons, one in February and one in August. It is important to note that not all companies report during the season because the exact date of a reporting release depends on when the given company’s quarter ends. As such, it is not uncommon to find companies reporting between seasons.
This is a very active time in the market as participants including analysts, traders and investors review the reports, which obviously will affect their positions on or in a company. You can often see a lot of movement in the shares of companies releasing reports as the market reacts to the new data. It is not unheard of to see very large movements in share price in either direction. It is also a highly active time for wealth management firms like ourselves and we are gearing up at the moment, ready to review our holdings on the break of any new and interesting information.
Now knowing whether you need to worry or not is what is important and when it comes to reporting, it is the market expectations that matter. A 20% rise in earnings might be met with a large share price fall if the market was expecting 30%. So it is important to understand it is this difference between market expectations and what a company delivers that can sometimes produce great opportunities in reporting season. We also look out for key financials and are confident when seeing growing EBITDA, NPAT, strong operating margins, increasing sales/revenue and hopefully the repayment of any outstanding debt.
It is important to note that as a fresh investor, reporting season can be a nervous time to enter the market, as a result volumes tend to be thinner and the market seems to have no direction until after the results are announced.
Exciting stock to look out for:
Altium Limited (ASX: ALU)
The electronic PCB software company’s share price has risen by 81% over the past year, now trading at $14.16. The business is flying high on the back of the ‘Internet of Things’ growth, which is showing potential to significantly boost revenue over the coming years. The share price may have gotten ahead of itself, but it seems as if Altium is going to reveal another set of impressive numbers which would only further this winner. It’s currently trading at 40x FY18’s estimated earnings.
This content has been written and published by KOSEC – Kodari Securities.
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CEO Michael Kodari