Surprise ASX beats and misses, sleeper stocks and overrated/underrated

Please note, this interview was recorded Monday 31 August 2026

A 23% surge in a fledgling fast-food business, a record-low pre-commitment rate at one of the market’s most highly rated property groups, and a $100 million capital raise from a fast-growing mining services company.

Reporting season delivered plenty of numbers, but these were among the results that stood out most to the Yarra Capital Management equities team members Marcus Ryan (broad caps), Michael Steele (small caps), and Joel Fleming (micro caps).

There was also a divide in how they viewed the market from here. While one member of the team remains cautious, with Australian equities trading at a 20% premium to their historical average, the others see significant opportunities emerging in their respective cap spaces. 

In this rapid-fire round, the trio reveal their biggest surprises and misses, identify two sleeper stocks, and debate whether resources and the need for rate cuts are overrated or underrated.

The biggest surprises of reporting season

For Steele, the standout was Guzman y Gomez (ASX: GYG), the shares of which jumped 23% in the three trading days following its result.

“That was due to accelerating like-for-like sales, store growth and margin expansion.”

In other words, investors were not responding to one isolated bright spot. The Mexican fast-food chain delivered across the key drivers that underpin its ambitious expansion story.

Fleming stayed with the letter G, nominating mining services company GR Engineering Services (ASX: GNG).

The company announced a $100 million capital raising and laid out an ambitious growth outlook across a broader range of commodities than it has historically served. Fleming said the business was executing well, its pipeline continued to expand, whilst index inclusion could provide another catalyst.

The biggest misses

Ryan’s biggest miss came from Goodman Group (ASX: GMG). The shares fell around 6% following the result, but he believes the reaction was relatively restrained given the amount of execution already priced into FY27.

Goodman has rapidly expanded into data centre development, with project commencements doubling over the year to $8 billion. However, Ryan said one number deserved closer attention.

“With that very large development book, the pre-commitment rate is the lowest on record, at 13%.”

That is a marked departure from Goodman’s traditional warehouse developments, which would typically be 60–70% leased when construction commenced.

Ryan stressed that Goodman had done an excellent job building its data centre platform. Nevertheless, the combination of an enlarged development pipeline, limited pre-commitments and high expectations leaves less room for execution missteps.

In micro caps, Fleming pointed to EML Payments (ASX: EML), a turnaround story investors have been waiting on for some time.

“People see the potential, but that turnaround seems to be taking a bit longer than they would like.”

The result included further timing issues, again pushing out the recovery investors had hoped to see. Fleming said the business remained one to revisit, but patience was being tested.

Sleeper stocks the market may be missing

Every reporting season produces companies whose longer-term prospects are obscured by a short-term concern. For Steele, Auckland International Airport (ASX: AIA) fits that description.

“The market was focused on the short-term headwind from the Middle East war, and that was distracting from a very significant growth opportunity from reinvesting in the assets over time.”

The airport is undertaking a substantial investment program that could strengthen and expand the asset over the long term. Steele believes investors may be paying too much attention to the immediate disruption and too little to that opportunity.

Ryan’s sleeper stock was TPG Telecom (ASX: TPG), which he said often hides in the shadow of its much larger rival, Telstra (ASX: TLS).

The appeal begins with the structure of the mobile market. Ryan sees rational pricing and scope for industry returns to improve, while TPG’s relatively affordable products could prove well suited to a more pressured consumer environment.

He is also constructive on the income outlook.

“Strong operating cash flows support the dividend, and we saw the dividend come in 6% ahead at the result.”

Caution at the top, optimism below

Asked to describe how he felt after the season in one word, Ryan chose “cautious”. His concern is valuation: the market is trading at a 20% premium to its historical average.

Steele and Fleming were both more positive, reflecting the opportunities they continue to find in smaller companies.

“There are a lot of opportunities in small caps,” Steele said.

Fleming believes the biggest opportunity between now and the next reporting season is for small caps to claw back some of their underperformance against large caps.

He said smaller companies had delivered a solid reporting season and many retained attractive growth prospects. There may also be a competitive opening if larger companies prioritise dividends over reinvestment.

“Perhaps larger companies are going to start distributing more income and investing less. Maybe there’s an opportunity for small companies to double down, steal some of those customers and build a stronger business.”

The biggest risk before next season

The opportunity in small caps does not come without a macroeconomic risk. For Steele, the greatest threat over the next six months is an upside inflation surprise that forces interest rates higher even as economic activity slows.

“Any sort of upside surprise in inflation which causes further interest rate increases into an already slowing economy.”

That combination would place further pressure on households and businesses, while potentially challenging the valuations of companies whose earnings are weighted further into the future.

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