1 ASX 200 stock I'm buying hand over fist despite the market's pessimism

I've been building up my position in this compelling stock.

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The S&P/ASX 200 Index (ASX: XJO) stock Johns Lyng Group Ltd (ASX: JLG) has been my most frequent investment so far in 2024.

I took advantage of the Johns Lyng share price dip — which you can see in the graph below — after the company reported its earnings results in February.  

One of my main investment strategies is to buy growing businesses with compelling long-term futures when the share price has fallen.

I like it when the market offers a business at a cheaper price. It's just like loading up at the supermarket when our favourite products go on special – the product is the same, but the value is better.

I wouldn't buy something just because it has fallen. A business that can grow its earnings is appealing because of the lower price/earnings (P/E) ratio. I'm going to talk about three reasons why I think the ASX 200 stock can keep growing profit and why I have invested multiple times in 2024.

Solid core growth

Johns Lyng prides itself on rebuilding and restoring various properties and continues after damage caused by insured events, including impact, weather, and fire.

No business is guaranteed to grow its profit every year, but Johns Lyng is doing a great job at continually growing the core operations' earnings.

In the company's FY24 first-half result, it reported that its insurance building and restoration services (IB & RS) revenue rose 13.7% to $426.1 million, and the IB & RS 'business as usual' (BaU) earnings before interest, tax, depreciation and amortisation (EBITDA) grew 28.1% to $55 million.

During HY24, the ASX 200 stock secured new contract wins with Tower Ltd (ASX: TWR), Safety Culture Care and RAA, along with contract extensions with Hollard and Suncorp Group Ltd (ASX: SUN).

Johns Lyng managing director Scott Didier said:

Our IB&RS BaU work constitutes the cornerstone of JLG's earnings. With an annuity style profile, these earnings instil a confidence in our sustained revenue streams, and we anticipate substantial growth as we continue to enhance our market presence and capitalise on our diversified service portfolio, notably within our burgeoning strata business.

Expanding operations

The company continues to expand its footprint in Australia and the United States, which I think can help it increase earnings in the long term.

For example, it announced a couple of months ago that it had entered into an agreement with Allstate, which is one of the largest insurance companies in the US.

The ASX 200 stock has joined its emergency response and mitigation panel. There are 16 million Allstate policyholders throughout the US, and it covers the provision of "emergency response make-safe and water mitigation."

In Australia, the ASX 200 stock is making acquisitions in strata management and essential home services (such as gas, fire, and electrical compliance and safety checks), unlocking additional and diversified earnings.

The company's catastrophe response earnings fell in HY24, but that's understandable – catastrophes do not occur like clockwork. There seems to be a growing number of expensive storms, which may mean more work for Johns Lyng in the future.   

Future international growth?

There's no guarantee that the ASX 200 stock will expand beyond the countries it's currently in. Its relatively recent move into New Zealand is beneficial for its total addressable market.

The US is a huge market and represents a very large opportunity for the company to tap into for years to come.

I'm particularly intrigued by management's comments that may indicate further geographic expansion in the future.

Johns Lyng Group Australia CEO Nick Carnell had this to say at the time of the Tower agreement win:

We are delighted to work with one of New Zealand's premier insurance brands and this is a further demonstration that our business model can be implemented seamlessly across the Tasman and beyond.

John Lyng's interest in growing into the US and New Zealand gives me hope the ASX 200 stock could expand into other countries, such as Canada, in the future.

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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