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Here’s what I’m looking for this reporting season

Reporting season is my favourite time of the financial year. We get a true insight into how our shares have performed – what they have done well and what needs a bit of improvement.

Expectations are different for every single company. Profit growth of 10% might beat expectations for one company but 20% growth could be a disappointment for another company.

However, regardless of how much the profit growth is, I’m still looking for the following things from all of my shares:

Revenue growth

I expect all of my shares to grow revenue, even it’s just by 1%. To me, revenue growth signifies that a company is still relevant in this era. Even if the company only grows revenue by increasing prices that’s good enough for me. It’s very difficult to grow the profit if revenue isn’t growing.

Margins increasing

Economies of scale is a great factor to help businesses grow profit quicker as revenues grow. The bigger the business gets the more profitable it should become. If margins are declining then that could be a sign that a business’ economic moat is being eroded. Altium Limited (ASX: ALU) and BWX Limited (ASX: BWX) are two where I expect margins to increase.

Earnings per share (EPS) growth

Everything a business does should ultimately boost the earnings per share growth in the long-term. I’m happy for a business to invest for the long-term, even if that means short-term EPS are hurt, as long as EPS grows in the long run. Greencross Limited (ASX: GXL) and Ramsay Health Care Limited (ASX: RHC) are two businesses investing for long-term EPS growth.

Strengthening the balance sheet

Interest rates are beginning to rise around the world, including in Australia. I think a lot of businesses need to improve their gearing before the interest charge becomes too high and damaging for profit. The most indebted businesses would benefit the most by paying down some debt. Businesses like Healthscope Ltd (ASX: HSO) and Rural Funds Group (ASX: RFF) will need to be careful.

I think these shares could report very well next month and are well worth investigating today.

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Motley Fool contributor Tristan Harrison owns shares of Altium, BWX Limited, Greencross Limited, HEALTHSCPE DEF SET, Ramsay Health Care Limited, and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended BWX Limited, Greencross Limited, and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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 Bruce Jackson.

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