MENU

My 3 losers from reporting season so far

We are now over halfway through reporting season and there have been a lot of reports that have met expectations, but there are a few that I thought were disappointing.

Disappointing results

Domino’s Pizza Enterprises Ltd (ASX: DMP) reported that underlying earnings per share (EPS) grew by 5.8% and revenue grew 5.2%.

This was a big slowdown compared to previous years and sadly justifies the fall in share price from $80 to the $40s. Domino’s has a good long-term plan but this rapid slowdown wasn’t expected.

Domino’s is still trading at an expensive earnings multiple, so it will have to deliver in the second half to avoid further falls.

Healthscope Ltd (ASX: HSO) reported a further fall in profit for various reasons. The private hospital operator may have a long-term tailwind but shareholders also want to see short-term results too.

Management point to revenue growth as progress, which it is. Revenue growth should help profit growth, profit growth is what shareholders need and want to see. Ultimately, everything a business does should aim to help the earnings per share and the strength of the balance sheet.

Healthscope will need to turn profit decline into profit growth quickly.

Cochlear Limited (ASX: COH) is one of Australia’s leading businesses and has done excellently over the past few years.

However, no business is worth any price. I thought it was quite disappointing that statutory net profit after tax (NPAT) declined by 1%, yet the business is trading at almost 40x FY18’s estimated earnings.

Cochlear will have to generate good earnings growth over the next year to justify its high price tag.

Foolish takeaway

All three businesses could improve profit soon, which is why I was disappointed with the reports this time. They could turn into good buys, but I wouldn’t want to make that bet at the current prices.

I think these top stocks are much more likely to be winners.

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 HEALTHSCPE DEF SET. The Motley Fool Australia has recommended Cochlear Ltd. 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.