I find the ASX share reporting season very interesting. Opening company reports is like Christmas — I get to see how they have performed and what the numbers will be.
Sometimes, the results are better than expected, and sometimes, they're like a pair of unfashionable socks the market didn't want.
Let's talk about two ASX shares that have positively surprised me this earnings season.
It's good to look at the positives. Good investing, in my mind, is partly about finding businesses that beat market expectations over the long term.
Let's look at the two results that positively shocked me.
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Temple & Webster Group Ltd (ASX: TPW)
This company describes itself as a leading online retailer of furniture and homewares. It sells more than 200,000 products. It also has a growing range of home improvement products, as well as trade and commercial solutions for business customers.
For the first six months of FY25, Temple & Webster reported revenue growth of 24% to $314 million, free cash flow growth of 61% to $32.5 million and net profit after tax (NPAT) growth of 118% to $9 million.
The level of profit growth really impressed, including the operating profit (EBITDA) margin reaching 4.2% when the company is targeting between 1% to 3% for FY25.
The company's costs continue to improve. Fixed costs as a percentage of revenue declined to 10.5%, while AI is now handling more than 60% of all customer pre-sale and post-sale support interactions, which has resulted in a reduction of customer care costs by more than 50% since the first half of FY23.
In the trading update, the company said its February revenue growth to 10 February 2025 was 19%. That's a strong growth rate considering the challenging economic conditions and the fact that the sales figure it has to beat is getting bigger and bigger.
Temple & Webster's scale and underlying profitability are improving, and I think this bodes well for the ASX share's future.
Pro Medicus Ltd (ASX: PME)
Nearly everything this medical technology business does is impressive, in my view. But this result surprised me by how good it was.
The market already knew the company had won a number of large contracts with US customers, but I was particularly impressed by the profit margins the company achieved.
Pro Medicus reported revenue growth of 31.1% to $97.2 million and net profit growth of 42.7% to $51.7 million.
The ASX share's underlying operating profit (EBIT) margin increased to 72%, up from 66% in the first half of FY24. It's one thing for the profit margin to rise; it's another for such a large increase. That's a 600 basis point (6.00%) rise in just one year.
The scale of the increase suggests to me that it could rise further as the business grows. Pro Medicus attributed the strong margin growth to transaction revenue growth during this period.
Despite considerable hikes in dividend payments, Pro Medicus' cash and other financial assets increased by another 17.7% to $182.3 million, strengthening the company for the future.
I'm not sure what the Pro Medicus share price will do in the next year or two, but these financial numbers certainly impressed me.
