1 ASX stock to consider buying that could be the next Brickworks

This company has great long-term potential, in my opinion.

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The ASX stock Johns Lyng Group Ltd (ASX: JLG) is a great company with a lot of growth potential from where it is today. In some ways, it reminds me of Brickworks Limited (ASX: BKW) and might be just as successful.

Johns Lyng is a fairly unique business on the ASX, so there's not really a direct comparison. The core business is built on its ability to rebuild and restore a variety of properties and contents after damage by insured events like impact, weather and fire events.

Its client base includes major insurance companies, commercial enterprises, local and state governments, body corporates/owners' corporations and households.

Brickworks is best known as a leading brickmaker, though it also produces several other building products.

Expanding business operations

I think both Johns Lyng and Brickworks have benefited significantly from growing beyond their original/core operations.

In 1950, Brickworks gained total control of Austral Bricks, making it the biggest and most powerful single brickmaking company in Australia. Since then, it has expanded its building products portfolio into several other areas, including masonry and stone, roofing, specialised building systems, cement, and timber.

Brickworks is also benefiting from owning a growing portfolio of impressive industrial warehouses/properties.

Johns Lyng is also doing a great job of growing. It is building exposure to disaster recovery work, with catastrophe events continuing to exhibit "large and more enduring characteristics".

In addition, the company is growing in strata building and management services, as well as essential property repairs, maintenance and compliance services (including fire, gas and electricity).

Each of those additional earnings areas gives the ASX stock a very useful growth avenue where there is room for both organic growth and acquisitions.

Growing geographically

A few years ago, Brickworks took the exciting decision to expand its geographic presence to the United States with a few acquisitions in the world's biggest economy. It's still early days in the country, but there's great potential for Brickworks to replicate its Australian success in the US.

Johns Lyng has also expanded into and is growing in the US. It was recently chosen by Allstate, one of the largest insurance companies in the US, to join its emergency response and mitigation panel.

The ASX stock recently expanded into New Zealand and has made an agreement to provide repair services to Tower Ltd (ASX: TWR) as part of its New Zealand panel.

Long-term focus

Brickworks isn't trying to maximise short-term profits; its mission is to do what is right for the company's long-term sustainability and profitability.

I think that's the best strategy for long-term shareholders. For example, in the recent FY24 first-half result, Brickworks advised there would be a series of plant closures in the second half of FY24 to undertake maintenance and control inventory.

Brickworks is always considering how best to use its assets, including its large property portfolio of land and buildings.

Johns Lyng is smart in thinking about how to utilise synergies between the core business, strata management, and essential property services. Each segment can provide good, defensive earnings to John Lyng separately, but together, they could be a powerful combination.

Foolish takeaway

The Johns Lyng share price has dropped 22% since 26 February 2024. I think this is a great opportunity to invest in a growing business with increasing profit margins. Once Fool's trading rules allow me to, I'm thinking about adding more Johns Lyng shares to my portfolio.

Motley Fool contributor Tristan Harrison has positions in Brickworks and Johns Lyng Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Johns Lyng Group. The Motley Fool Australia has positions in and has recommended Brickworks. 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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