Earnings season is about to enter its final week. So far we’ve seen around 70% of ASX-listed companies report their earnings to 31 December and the results have been good! The ASX 200 has now recovered all of its 3.5% lost in January and powered to a new 2014 high of 5,438. Importantly though, now is one of the best times to buy as investors have the most information possible about how any individual company is fairing; until the next period of earnings results in August that is.
In the last month we’ve seen some companies, such as SEEK Limited (ASX: SEK) rise strongly on the back of solid results, while others such as the Reject Shop Limited (ASX: TRS) were hammered by investors disappointed by a seemingly underperforming company. But which companies still represent good buying? Are there companies that were dealt with harshly when they shouldn’t have been? Or perhaps the results are better than the market truly realised.
ASX Ltd (ASX: ASX) operates the very exchange that Australian shares trade on. The company reported increasing profit in all of its sectors and will benefit from a rise in algorithmic trading, and the expected increase in IPOs and mergers in the next 12 months.
Bank of Queensland Limited (ASX: BOQ) was punished by investors through January and early February after concerns surfaced about the group’s slow progress achieving its lending target. This is expected to lead to lower earnings next year, however the bank will be boosted by lower funding costs and healthy margin growth. BOQ is poised for a good 2014.
Rio Tinto Limited (ASX: RIO) delivered earnings and revenue above consensus estimates and blew analysts out of the park with a big 15% rise in dividend payout increase, its yield to mirror that of rival BHP Billiton Limited (ASX: BHP). The company is heavily exposed to China and the iron ore price, but that could be a good thing if the country keeps growing like it has in previous years.
Finally, Super Retail Group Ltd (ASX: SUL) disappointed investors in late January by delivering revenue and earnings growth that was below expectations. While net profit increased 1.7% and revenue rose 5.8%, the company’s outdoor leisure businesses failed to fire. Super’s share price fell over 20% between 1 and 24 January before recovering slightly to close last week 13% down for the year. The group’s management is regarded as top-class and viewed last half’s result as a blip which should be corrected in the short term. If they can deliver on the goods investors should be well rewarded.
Earnings season is the perfect time to invest in great companies. The best companies are rewarded for their good work, while poor ones are generally found out. For Foolish investors with a long-term investing philosophy, often it’s a case of ‘business as usual’, however every now and then the market will throw up good opportunities for long-term investments. The four companies above all have quality management, strong investor support, and business models that should continue to perform well in the future.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned.
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