The August earnings season is over, and we gained a number of interesting insights about the ASX share market.
Australia's two reporting seasons — in February and August each year — are the most interesting times of the financial year, in my view. This is because we actually get to see how the companies have performed. For most of the year, share prices typically move up and down on company news rather than performance.
After gaining fresh insight into the general health of the ASX share market, I think there are a few powerful lessons that we can take from August.
The ASX share market is not the wider economy
It's important to remember that the ASX share market is full of the largest and strongest businesses in Australia. They have strong balance sheets, some of the most trusted brands, the largest profit margins and the ability to offer customers the best value.
Names like JB Hi-Fi Ltd (ASX: JBH) and Wesfarmers Ltd (ASX: WES) were able to report FY25 trading updates that showed positive sales growth in the first few weeks of the next financial year.
I think the last two years have shown that investors can be optimistic about economy-linked companies despite worries about the wider economy.
Dividends still matter
Passive income can play an important part in the overall total shareholder returns.
The August reporting season saw a number of leading Australian companies grow their payouts again, including Telstra Group Ltd (ASX: TLS), Commonwealth Bank of Australia (ASX: CBA), Wesfarmers and Coles Group Ltd (ASX: COL).
In an era of ongoing inflation, I think it would be fair for investors to hope for growing dividends to offset the pain of higher living costs.
Winners keep winning
In the last 12 months (and the longer term), a number of Australia's leading ASX growth shares have climbed amid solid investment revenue and earnings growth. Investors sent the price/earnings (P/E) ratios of these businesses higher.
Reporting season is a make-or-break period because these high-flyers need to deliver results that match the market's expectations.
Amazingly, names like Pro Medicus Ltd (ASX: PME) and WiseTech Global Ltd (ASX: WTC) delivered such strong results that investors sent those share prices even higher.
I think this goes to show that the best ASX companies can keep growing profit better than the market was expecting for a long period of time.
The banking industry is in a tough spot
Most of the large banks didn't deliver their full-year results during August. However, a couple of updates weren't as positive as shareholders would have liked. There doesn't seem to be anything on the horizon that may change the dynamic in the foreseeable future.
Commonwealth Bank of Australia (ASX: CBA) reported higher arrears, while a Bank of Queensland Ltd (ASX: BOQ) restructuring program will cost tens of millions of dollars.
It's a difficult environment for resources
The final lesson is that ASX mining shares do go through periods of difficulty, and we're currently seeing that for several of the biggest players.
Both the BHP Group Ltd (ASX: BHP) result and the Pilbara Minerals Ltd (ASX: PLS) result saw big declines in profit.
Investing is a long-term endeavour, and it's important to remember that declines happen during good times, too, so investors shouldn't be too enthusiastic about paying high prices during boom times.
