For Australia’s public companies, this is the moment of truth. The 2025 profit reporting season has started, and this is when companies on the ASX let the market know how much money they earned last year.
Reporting season is an exciting but sometimes stressful time for investors. It’s when companies share the most detailed information about how they’re doing and what they expect for the future.
This makes now a great time to properly assess potential investments, as well as evaluate any investment decisions you’ve made throughout the year. But it’s not always easy. Profit result announcements and annual reports are full of jargon, and things are not always as rosy as they appear on the outside.
Here’s what you need to know to cut through the noise.
Look at the bigger picture.
A marathon, not a sprint
Most investors reading a company’s annual report and financial statements are looking to glean enough information to decide whether the business is a good investment.
Unfortunately, there’s no magic calculation to tell you this. You need to assess a wide range of qualitative and quantitative information to form an opinion.
Successful investors take a long-term approach to this process.
While profitability and revenue growth are important factors, ask yourself whether these are sustainable over the next three to five years.
Are there internal or external risks that could impact the performance of the company? Does it have a competitive advantage in the marketplace? How much debt does it have? How much does it plan to take on? And how experienced and stable is the management team?
Always remember that it’s in a company’s interests to paint things in the best possible light, so assume the report is biased and then balance it with your own research and conclusions.
The financial statements
Public companies are required by law to comply with relevant accounting standards and list their financial statements with the Australian Securities and Investments Commission within three months of the end of their financial year.
The three main financial statements are:
- The Statement of Comprehensive Income, detailing revenue, expenses and profit (or loss).
- The Statement of Financial Position, which sets out the company’s assets, liabilities and equity.
- The Statement of Cash Flows, which lists all cash transactions for the reporting period.
You may also hear these referred to as the Income Statement, Balance Sheet and Cash Flow Statement.
These are typically accompanied by a ream of explanatory notes, which can be helpful to shed light on how the accountants arrived at the final figures.
Key terms
These are some of the main accounting terms that every would-be-investor needs to be across. This isn’t an exhaustive list, and key terms will often vary depending on the specific business and industry you’re looking at, so do your homework.
- Net Profit After Tax (NPAT) – A measure of how much money the company made after every single expense has been accounted for. While it’s commonly reported, it can be influenced by various accounting practices, so it’s not always a reliable indicator of overall performance.
- Earnings Before Interest and Tax (EBIT) – Think of this as NPAT plus interest and ax charges. EBIT is helpful when comparing companies with different tax rates or debt levels.
- Earnings Per Share (EPS) – The company’s profit is divided by the number of shares on issue.
- Return on Equity (ROE) – The company’s profit is divided by shareholder equity (assets minus liabilities). This shows the rate of return investors get on the money they’ve invested.
When comparing key measures, be sure to look at industry peers and averages to get an idea of how a company is faring relative to the competition.
While reading financial statements and annual reports may seem like information overload, the more you do it the better you get at understanding of them, and the better you’ll understand the business
