I just invested $3,000 into this top ASX 200 stock

I'm a big fan of this business.

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I've invested $3,000 into an S&P/ASX 200 Index (ASX: XJO) stock, which I'm very positive about. The business I've invested in is Johns Lyng Group Ltd (ASX: JLG).

A lot of stocks have soared higher in the last four or five months, but not Johns Lyng, despite all of the positives.

This business offers several services. Its core service is restoring and rebuilding properties and contents after an insured event, such as impact, weather, or fire. Its main client base includes major insurance companies, commercial enterprises, local and state governments, body corporates and owners' corporations, and retail customers.

Each investor may have sold for a different reason after seeing the FY24 half-year result, but the decline in its catastrophe revenue may have been a surprise and unwanted. However, I think this is just a short-term stumbling block rather than a change in the long-term outlook. I decided the pullback was a good time to invest (again) in the ASX 200 share.

Positives about the ASX 200 stock

Its business as usual revenue rose 13.7% in the FY24 first-half result – it's good to see compounding growth that's in the double-digits.

The company also reported profit growth that was faster than revenue growth – normalised business as usual net profit after tax (NPAT) grew 15.8% to $25 million. If profit is growing faster than revenue, that's exactly what I want to see in terms of demonstrating operating leverage.

The board of directors declared an interim dividend of 4.7 cents per share, which was an increase of 4.4%.

In terms of the catastrophe work, Johns Lyng said:

While CAT events are innately unpredictable, JLG's strong relationships with insurers and Governments, along with its growing geographical footprint, means it expects this segment to continue to expand in future periods.

I liked seeing that the business has continued making acquisitions in the strata market, with the latest being Your Local Strata and AM Strata. This sector can provide pleasing recurring earnings and provide synergies with the core business.

The ASX 200 stock also upgraded its guidance for earnings before interest, tax, depreciation and amortisation (EBITDA) by 5% and upgraded its revenue guidance by 3.5%.

Johns Lyng share price valuation

According to the estimate on Commsec, the ASX 200 stock is valued at 27 times FY25's estimated earnings.

I think this is a reasonable valuation for a company that's growing its underlying earnings at a double-digit rate. I'm backing the business for the long term.

Motley Fool contributor Tristan Harrison has positions in Johns Lyng Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Johns Lyng Group. The Motley Fool Australia has recommended Johns Lyng Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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