The S&P/ASX 200 Index (ASX: XJO) growth share space was beaten-up last year, and there may be ideas hiding in plain sight for investors to take advantage of.
Higher interest rates have increased volatility on the ASX share market, while inflation is making it a tougher environment for households and some businesses.
I'm not exactly sure what share prices are going to do next, but I think it makes sense to look at businesses that have appealing long-term growth prospects, like the two below.
REA Group Limited (ASX: REA)
This is the business that owns realestate.com.au, realcommercial.com.au and other property-related businesses in Australia, including a mortgage broking division. It also has exposure to the US property market through its stake in Move Inc. It also has a division called REA India and has exposure to other Asian markets through stakes in other websites.
The REA Group share price is still down by more than 20% from its peak in November 2021, though it has recovered from the lowest point, as we can see on the chart below.
What attracts me to the company is its excellent market position for realestate.com.au. The company boasts that it gets more than three times the visitors that its nearest competitor does. This strength can allow realestate.com.au to regularly implement price increases with little detrimental effect, boosting margins for the business.
There are a lot fewer listings at the moment, which is hurting the ASX 200 growth share's revenue in the short term. In the FY23 third quarter, national listings were down 12% year over year.
But, in the longer term, the amount of properties in Australia is increasing and so is the total population. I think this bodes well for its future earnings, dividend and margins.
Johns Lyng Group Ltd (ASX: JLG)
Johns Lyng describes itself as an integrated building services business that delivers building and restoration services across Australia and the US. Its core business is focused on having the ability to rebuild and restore a variety of types of properties and contents after damage by insured events including impact, weather and fire events.
It has a number of different types of clients including major insurance companies, commercial enterprises, local and state governments, body corporates and owners' corporations, and retail customers.
I think this business could be one of the ones that can succeed if natural disaster events increase in number and financial damage.
For example, it recently won a contract from the South Australian Government to "support disaster recovery operations following extensive flooding along the Murray River."
The ASX 200 growth share is seeing a lot of growth, combined with a rising profit margin. FY23 first-half revenue rose by 71.2% to $635.6 million and net profit after tax (NPAT) increased by 83.6% to $34.1 million. It grew the interim dividend by 66.7%.
Johns Lyng is expecting more growth thanks to a number of factors, including its recent contract wins. It's also predicting it will win new clients as well as continue to roll out and work on cross-selling with its strata services. The ASX share is also actively looking at more acquisitions.
The business is growing through many different avenues, and there is plenty of potential for the company to grow in other countries.
