FY23 Interim Reporting season review

Now that the dust has settled on another reporting season, and the usual bouts of despair and europhoria have been had, with a calm head and without the commentary noise, we now have the opportunity to delve deeper into the numbers.

Not only can we assess a company’s financial performance and how analysts have changed their perception of it, but also see how the company now performs relative to the key drivers of stock market returns, and where they sit relative to their peers.

The following builds on the original list published two weeks ago and includes all the ASX200 companies and some stocks outside of that which may be of interest.

Few things to note first:

• As stocks are ranked between 1 and 100, it is more likely that a Stock Ranked 95 will fall 20 ranks than it is to rise 5. Vice versa, a stock ranked 10 is more likely to gain 20 places rather than fall 5

• This exercise is measuring changes in each factor. This does not necessarily mean they have the highest or lowest scores. Just that they changed the most.

• You need to do further research in to why each factor did what it did for a specific company

• We will discuss this post and cover individual companies in more depth within the members only exclusive webinar to be held on Thursday 9th March. Book your place here.

• Data as at 1 March 2023. Small changes may have occurred since then on account of price moves or revised data items.

Please read a brief reasoning as to who were the biggest gainers and losers to their overall rank, and for each individual rank

Largest Stock Rank score gainers this reporting season with the ASX200

1. Endeavour (ASX:EDV)  (tie for first)

Despite its defensive qualities, EDV failed to ignite sentiment, particularly given Woolworths selldown in December. However the recent 17% jump in earnings and higher dividend surprised many analysts, who have raised their earnings expectations higher since the result lifting the Momentum, and overall ranking significantly.

1. ASX (ASX:ASX) (tie for first)

After the Blockchain settlement platform debacle, the ASX has suffered from a sentiment driven sell off over the past year. However their latest result included high quality metrics, for example, Return on Capital Employed at over 15% and operating margins above 50%. Value also improved on account of the past price falls lifting their ranking.

3. Karoon Energy (ASX:KAR) 

KAR is starting to see the full benefits of the Brazilian Bauna project acquisition the company made back in 2020, flow through onto their accounts. The ramp up in earnings has boosted both their Quality and Value ranking significantly as the financial metrics start to improve with more to come according to the company.

4. Magellan Financial (ASX:MFG)

The maligned fund manager MFG has had its well documented troubles. Previously its Stock Rank had suffered considerably, with little sign of when the bleeding would stop. The latest half year may be a sign according to analysts who have improved their view on the business leading to the Momentum score improving. The work is still ahead of MFG rather than behind it.

5. Lendlease (ASX:LLC)

With cost blow outs and budget overruns in the past, the latest half year result confirmed that the company is back on the road to profitability and therefore there has been a big jump in the company’s Quality score. Despite the improvement, much like MFG, the company has the majority of its work ahead of it and needs to make its profit sustainable.

Largest Stock Rank score decliners this reporting season within the ASX200

1. HMC Capital (ASX:HMC)

The first half has started amidst a lot of uncertainty for many money managers such as HMC. The company highlighted that they had made a conscious decision to materially slow the volume of capital deployed across their platform due a shifting macro economic landscape. Analysts wrote down the result, and alongside muted earnings reported, the stocks valuation measures have also worsened.

2. Silver Lake Resources (ASX:SLR)

Gold and Copper producer SLR delivered a drop in revenue in the latest half which translated to a NPAT loss. This was below analyst expectations resulting in cuts to their EPS forecast. Further, the negative numbers have impacted its Valuation ranking to the negative and hence the overall Stock Rank score has dropped with it.

3 - Aurizon Holdings (ASX:AZJ)

Rail haulage business AZJ reported a disappointing fall in profitability that filtered through to downgrades in both its Quality and Value scores. The lingering impacts of wet weather also saw analysts take the sword to EPS expectations and the price has reflected a downgrade cycle impacting its overall Momentum score.

4. Bega Cheese (ASX:BGA)  (tie for fourth)

Rising costs and production issues impeded BGA’s latest result and saw both Quality and Value scores fall. While the company has flagged that it will look to increase prices in the second half and that milk production headwinds are expected to moderate in 2H FY23 and FY24, analysts continued to downgrade the stock and the price has followed.

5. Iress (ASX:IRE) (tie for fourth)
Wealth technology provider IRE recorded a 28% fall in profits, despite revenue growth of 3.7%, This margin erosion saw analysts downgrade their expectations on the business in both FY23 and 24. When benchmarked against the price decline over the past twelve months, the stock experienced a drop off in its Momentum ranking which impacted its overall score.

Largest Quality score gainers this reporting season within the ASX200

1. Flight Centre Travel (ASX:FLT)

Coming from a low base, FLT saw the biggest improvement in quality mainly on account of the improvement since COVID.

2. Cleanaway Waste Management (ASX:CWY)

Likewise coming off a low base, a stabilisation of operating profit saw the company improve its quality rank significantly.

3. De Grey Mining (ASX:DEG)

Following a recent capital raising, the company has accrued a sizeable cash position that generated strong interest revenue for the first six months of the year. Therefore, the improvement to Quality will only be sustainable should they get the Hemi deposit at Mallina into production.

4. Lendlease (ASX:LLC)

Reasons shared above

5. GUD Holdings (ASX:GUD)

Refer to Chris’ recent analysis to learn more. Read here.

Largest Quality score losers this reporting season within the ASX200

1. HMC Capital (ASX:HMC)

Reasons shared above

2. Aurizon Holdings (ASX:AZJ)

Reasons shared above

3. InvoCare (ASX:IVC)

Operating profit fell and both ROE and ROCE are at very low levels. Amongst the lowest in the market for a profitable company.

4. Scentre (ASX:SCG) 

Likewise the company trades on a low ROE and with higher than average levels of debt the Quality score was impacted.

5. Origin Energy (ASX:ORG)

The company continues to generate larger losses. The Brookfield consortium bidding for the company understandably reduced its offer to $8.90. The market was relieved they were still interested.

Largest Value score gainers this reporting season within the ASX200

1. Pilbara Minerals (ASX:PLS)

2022 was a year PLS came to roost realising massive profit gains due to soaring lithium prices. The strong profit made all valuation metrics look far more favourable and they paid a maiden dividend,

2. Karoon Energy (ASX:KAR)

Reasons shared above

3. carsales.com (ASX:CAR)

The acquisition of Trader Interactive is making a solid contribution to the bottom line and therefore its valuation metrics.

4. Mineral Resources (ASX:MIN)

Like PLS, has benefited from the booming Lithium prices. With a strong dividend and earnings forecasts, the company is still not cheap, but it did improve.

5. IGO (ASX:IGO)

A similar narrative for IGO whose improving numbers and recent price pullback has created more value, though like PLS and MIN, it is not dirt cheap.

Largest Value score losers this reporting season within the ASX200

1. Link Administration Holdings (ASX:LNK)

The superannuation administration and share registries company crashed to a loss of $410 million after heavy writedowns on its troubled UK business. The splitting of PEXA also impacted revenue.

2. Silver Lake Resources (ASX:SLR)

Reasons shared above

3. HMC Capital (ASX:HMC)

Reasons shared above

4. Healius (ASX:HLS)

Unsurprising to see HLS take a hit to value as earnings fell of a cliff as the tap was turned off PCR COVID testing

5. EVT (ASX:EVT)

EVT has never been dirt cheap, however with normalised earnings and the dividend falling this has made the company even less attractive from a value sense.

Largest Momentum score gainers this reporting season within the ASX200

1. Magellan Financial (ASX:MFG)

Reasons shared above

2. Beach Energy (ASX:BPT)

While the price has been flat to negative, and analysts remain cool on the stock, the latest result was a beat on expectations which the momentum model considers in its calculation

3. Challenger (ASX:CGF)

The stock has held up well relative to peers during the recent sell down. Further analysts have been upgrading earnings expectations on this stock.

4. Kelsian (ASX:KLS) (tie for fourth)

A four month price recovery, plus positive numbers resulting in upgrades inFY24 helped KLS improve its MomentumRank.

4. Flight Centre Travel (ASX:FLT) (tie for fourth)

While still below COVID level bookings, the improved Quality of the business has been reflected by the recent rebound and analyst' view on the company

Largest Momentum score losers this reporting season within the ASX200

1. PEXA (ASX:PXA)

A protracted price move down, successive analyst downgrades and subsequent miss saw the Momentum rank of PXA hit.

2. Iress (ASX:IRE)

Reasons shared above

3. InvoCare (ASX:IVC) (tie for third)

Reasons shared above

4. Monadelphous (ASX:MND)  (tie for third)

Rising costs and the continued labour shortages saw analysts downgrade MND’s earning expectations. This has contributed to a weak price of late.

5. BGA - Bega Cheese, DMP - Domino’s Pizza Enterprises, IAG - Insurance Australia (Tie for fourth)

Here is the Full list of ASX200 of gainers and losers PLUS other companies of interest

* Denotes the company has a different reporting period than June/December

## indicates that the company has not yet declared their latest numbers as quarterly accounts give them an extra months grace period

The list is sorted alphabetically. Data as at 1 Mach 2023.

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Information in this commentary is current as at date prepared unless otherwise stated. However, please bear in mind that investments can go up or down in value, and that past performance is not a reliable indicator of future performance. For more Important Information please refer to the Disclaimer section of this website.

This communication may contain general financial product advice. It has been prepared without taking into account your personal circumstances, and you should therefore consider its appropriateness in light of your objectives, financial circumstances and needs before acting on it.

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The author holds interests in the following stocks specifically mentioned in this article (excluding the table of data): PLS, MIN and IGO . This position can and will change at any time without notice.