We’re just getting into the swing of things for with reporting season for ASX shares. There are a few things that I’m looking out for:
COVID-19 impacts
COVID-19 is obviously on every investor’s mind at the moment. Some businesses have seen a rapid increase in demand for their products and services like data centre business Nextdc (ASX: NXT), online retailer Kogan.com (ASX: KGN) and online furniture business Temple & Webster (ASX: TPW).
Whereas others are obviously going to report a massive decrease in activity and revenue such as Qantas (ASX: QAN), Webjet (ASX: WEB) and Sydney Airport (ASX: SYD).
It’s important to understand what has happened with a business. Does the profit seem as though it will be subdued for longer than expected? Something like Qantas may be affected until a vaccine can be created.
I think there is a question of whether many retailers have just seen a short term boost due to all of the economic stimulus. Perhaps 2021 will see disappointing numbers after people have spent the money and already bought whatever they spent the money on. COVID-19 impacts on businesses like Adairs (ASX: ADH), JB Hi-Fi (ASX: JBH), Bapcor (ASX: BAP) and Nick Scali (ASX: NCK) will be interesting to see – particularly on the trading update for the first few weeks of FY21.
Balance sheet
Some businesses had to do capital raisings to ensure that their balance sheets remained sturdy during this difficult period. I think investors need to look at their investments’ balance sheets and think if they will need to do another capital raising (at a depressed share price).
Profit is important for the long term. And a 12-month period shouldn’t alter everything unless the balance sheet is too weak. I’m going to be looking at the balance sheet, the net cash/debt position and cashflow during this reporting season.
Outlook
FY21 could be just as interesting as FY20, particularly with the current Victorian restrictions. I think investors need to pay close attention to what management say about the outlook. It may represent a short term problem and therefore a share price drop could be an opportunity. Or it may signal a long term shift. It’ll be interesting to see the comments of shopping centre property businesses like Scentre (ASX: SCG) and Vicinity Centres (ASX: VCX).
Summary
This reporting season could certainly be one to remember. There are a lot of elements that could make it quite volatile over the next few weeks. I’m going to cover many of these points in my reporting over the next month. Good luck with your investing, hopefully your reports are good or there are opportunities to buy good shares at good prices. Both ASX dividend shares and ASX growth shares could be opportunities over the next month.
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