We analysed nearly 300 ASX companies during the February reporting season and the overall picture was mostly reassuring. Although net profits were down 4.7% on a year ago, which is well below the ten-year average growth rate of 10.2%, the decline was overwhelmingly due to the commercial property sector where weaker revaluations saw earnings fall 66% on a year ago.
| For period to: 31 December 2022 | Current | 10 Year Average |
|---|---|---|
| Companies in sample | 293 | 239 |
| Median sales (%) | 11.8 | 7.3 |
| Median Pre-Tax Profit (%) | -11.1 | 6.5 |
| Median Net Profit (%) | -4.7 | 10.2 |
| Median EPS growth (%) | -9.6 | 4.3 |
| Median Net Margin (%) | 8.6 | 10.4 |
| Median Dividend Yield (%) | 5.4 | 4.6 |
Sales revenue for our sample companies was up 11.8% on a year ago, well above the long-term average of 7.3%.
But this revenue has not flowed through evenly to the bottom line. Profits at industrial companies were up a healthy 11.8% but earnings at resources companies were down 1.7% and were even weaker in the financial and technology sectors.
Many businesses are struggling to pass on cost increases and profit margins at companies like Downer EDI (DOW), Baby Bunting Group (BBN), Data#3 (DTL), Temple & Webster (TPW), EBOS Group (EBO) and Aussie Broadband (ABB) are wafer thin.
On the flip side, stocks such as Atlas Arteria (ALX), BWP Trust (BWP), Carsales.com (CAR), Northern Star Resources (NST), Whitehaven Coal (WHC) and Lynas Rare Earths (LYC) are continuing to post impressive margins.
Investors also rewarded companies like Orora (ORA), Infomedia (IFM), Silk Laser Australia (SLA), Cochlear (COH) and Smartgroup Corporation (SIQ) for saying that they expect to pass on higher costs.
And finally, it was striking how well many retailers are doing. Rising interest rates might be hurting new homeowners and marginal borrowers but they do not appear to be having a significant impact on most households so far.