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To research ASX shares before investing, first decide what role the investment should play in your portfolio, then assess the company using its latest annual report, periodic results and ASX announcements. Check how it makes money, whether earnings are supported by operating cash flow, how debt affects its resilience, and whether its share price and risks suit your goals. No research process can guarantee a return or remove the risk of loss.
1. Set your investment goal and portfolio context
Decide whether you are seeking long-term growth, income, or a combination, and consider your time horizon and tolerance for risk. These choices affect which company characteristics matter most: an income-focused investor may pay closer attention to dividend history and outlook, while a growth-focused investor may concentrate on business performance and reinvestment.
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Look at your existing holdings before considering a new company. A share can appear attractive on its own but leave you too exposed to one company, sector, country or asset type. Diversification can spread exposure, though it cannot eliminate investment risk. Moneysmart’s shares guide and the ASX shares overview explain these broad considerations.
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Use the company’s latest annual report, periodic financial results and ASX announcements as your core evidence. Search the company by name or ticker on ASX, then check the document date and reporting period. A report from an older period may no longer reflect the company’s current circumstances; announcements can reveal material developments since its last results.
In the annual report, review the financial statements alongside management’s explanation of performance, funding and risks. For subsequent results and announcements, compare like with like—for example, the same reporting period or comparable periods—and note what has changed. Moneysmart’s share-selection guide identifies revenue and profit, debt and interest capacity, cash flow from operations, and dividend history and outlook as useful areas to examine.
3. Assess the business and financial record
Use the same questions for every candidate. These are prompts for investigation, not universal pass-or-fail thresholds.
How does the company make money?
Identify what it sells, who pays for it and what appears to drive revenue. Use the company’s explanation and results to understand whether reported performance is growing or weakening, and compare figures across consistent reporting periods. Rising revenue alone does not establish that a business is profitable or financially sound.
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Are earnings supported by operating cash flow?
Compare cash generated by business operations with reported earnings. If they differ substantially, look for the company’s explanation in its results and cash-flow disclosures. Consider whether the business is relying mainly on borrowing or issuing shares to fund operations or growth; the context matters, so a cash-flow figure should not be treated as a standalone verdict.
How does debt affect resilience?
Review how much the company owes, whether it can meet interest payments, and how debt has changed. Read management’s account of how the company expects to fund its operations and growth. Debt is not automatically a reason to reject a company, but its size and servicing demands can affect the company’s ability to withstand weaker conditions.
What does the dividend record tell you?
Check the history and stated outlook for dividends if income is part of your goal. Past distributions are a record of what happened, not a promise of future income. Consider them alongside earnings, operating cash flow and the company’s funding needs rather than treating a previous payment as proof that a dividend is sustainable.
What has changed, and what could undermine your case?
Read announcements issued since the last results and identify changes that might alter your original view. Consider the business risks the company discloses and ask which facts would weaken your reasons for investing. A company’s operating results and its share price are separate questions: good business performance alone does not establish that a share is fairly priced.
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4. Compare shares on relevant measures
Compare candidates using a consistent set of questions, but only where their business models, reporting periods and capital structures make the comparison meaningful. A growth-oriented company and an income-oriented one may warrant different emphasis.
| Comparison area | What to examine |
|---|---|
| Business performance | Revenue, profit and changes across comparable reporting periods. |
| Cash generation | Operating cash flow compared with reported earnings, including explanations for significant differences. |
| Debt and funding | Debt levels, interest capacity, changes in borrowing and stated funding needs. |
| Dividends | History and outlook, considered in light of earnings, cash flow and funding requirements. |
| Liquidity | How readily shares can be bought or sold at a desired price. ASX notes that this depends on a willing buyer; liquidity differs among companies. |
| Risk and portfolio fit | Material business risks and the effect of the holding on company, sector, country and asset exposure. |
For valuation, state the method and assumptions you use, and avoid comparing companies whose underlying economics or reporting do not support a useful comparison. The available information here does not establish a current fair value for any ASX share or a universal valuation cutoff.
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5. Use outside research with care
Broker research, market news and commentary can add context, but check important claims against company disclosures and consider the source’s incentives and limitations. ASX’s Equity Research Scheme covers selected under-covered small-cap companies and offers reports from participating providers. Check the scheme page for current coverage and availability. A report is analysis to evaluate, not a personal recommendation.
ASX’s 2023 Australian Investor Study reports that 38% of investors used annual reports and company websites as information sources, and 29% used the ASX website. These figures describe reported source use in that study; they do not measure accuracy or investment success. Read the ASX Australian Investor Study 2023.
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Consider what kind of help you need before choosing a broker or adviser. ASX describes full-service brokers as potentially offering advice, recommendations, research and tailored investment plans, typically at higher brokerage cost. Online brokers generally charge less but do not advise whether a particular decision is appropriate. Compare current services and fees rather than assuming a broker account includes personal advice. ASX explains how to buy and sell shares.
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6. Make and review your decision
Before acting, write down why you are considering the share, what evidence would weaken that case and which future company information you will monitor. Confirm you are using the latest available results and announcements. If important questions remain unresolved, continue researching or consider whether qualified financial or tax advice is appropriate for your circumstances.
Shares may produce returns through price growth, dividends or both, but neither outcome is assured. ASX states: “There is no guarantee your shares will rise in price while you own them or that the companies you invest in will prosper.” Shares can lose value, and an unsuccessful or delisted company can result in partial or complete loss of invested capital. Tax outcomes depend on individual circumstances; seek independent tax advice where needed. ASX’s share education page outlines these risks.
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