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.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.