It's nearly Easter already, with the first quarter of the calendar year almost done. I think there are some wonderful S&P/ASX 200 Index (ASX: XJO) shares that have a lot of long-term growth potential that I'd rate as buys.
In my opinion, it's the businesses with the biggest growth runways that can deliver the strongest shareholder returns over the long term.
When businesses have global growth plans, it gives them a huge amount of room to find avenues to boost earnings.
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Lovisa Holdings Ltd (ASX: LOV)
Lovisa is an ASX retail share that sells a variety of affordable jewellery for younger shoppers.
It has a relatively high gross profit margin, and each store can be very profitable for how much it costs to set up. It's very worthwhile to open stores in locations where it makes sense.
The business has over 160 stores in Australia, with the country only having a population of around 26 million. But, it only has 42 stores in the UK, 47 stores in Germany, four stores in Italy, eight stores in Poland, one store in each of Hungary, Romania, Canada and South America and two stores in Mexico, as well as many other under-serviced markets. Plus, it's not in mainland China yet, it has only just entered Hong Kong and there isn't a presence in India either.
What I'm pointing out is that Lovisa has huge potential to roll out more stores. Very profitable stores. In the FY23 second half, at the time of the result release, it had opened 31 net new stores to date and total sales had increased by 24%.
I think the ASX 200 share has an extremely promising future, for both earnings growth and dividend growth to 2030.
Using Commsec estimates, the Lovisa share price is valued at just 20 times FY25's estimated earnings with a possible FY25 grossed-up dividend yield of 5.6%.
Xero Limited (ASX: XRO)
Xero is an ASX tech share with a very promising future, in my opinion.
The accounting software business has grown enormously over the past decade. But, I think there's plenty of more growth to come as more businesses seek to digitalise their operations and more governments choose to require businesses to report their taxation information digitally.
Xero is growing in a number of countries including Australia, the UK, South Africa, Singapore, Canada and the US. This can help the ASX 200 share grow its operating revenue, and scale helps improve the business a lot considering it has a very high gross profit margin.
The company recently committed to cutting costs and improving its profit margin over FY23 and FY24, which will enable investors to see how truly profitable the underlying business is whilst it invests less heavily for growth.
If Xero can keep adding subscribers, increasing the average revenue per user (ARPU), maintaining strong subscriber loyalty and improving its profit margins then I think the business has a very promising future to 2030 and beyond.
