Leading broker thinks this top ASX 200 stock's earnings can soar 130% by FY28

This stock could see enormous profit growth in the coming years.

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The S&P/ASX 200 Index (ASX: XJO) stock Lovisa Holdings Ltd (ASX: LOV) has already delivered enormous profit growth over the past several years and it's predicted to see even more in the coming years.

This is a retailer of affordable jewellery with a global store network. At the end of the FY24 first-half period, it had at least ten stores in the following countries: Australia, New Zealand, Singapore, Malaysia, South Africa, the UK, France, Germany, Belgium, Poland, USA and Canada.

Store growth continues for ASX 200 stock

The business has added many stores to networks in its existing countries, while also expanding into new countries.

For example, in the last couple of years, it has expanded into a number of countries including Mexico, Canada, the UAE, Romania, Hungary, Spain, Botswana, Vietnam, mainland China and Taiwan. Many of these countries have much bigger populations than Australia, so there's plenty of growth potential for Lovisa's store network.

Australia had 175 stores at the end of HY24, with its total network being 854 stores.

With the HY24 result, Lovisa said:

With a footprint now in over 40 markets and increased support structures in place we are well placed to continue our global rollout across both existing and new markets.

The ongoing store growth is helping the ASX 200 stock's total sales. Trading in the first seven weeks of FY24 saw comparable store sales growth of 0.3% year-over-year. Total sales were up 19.6% year over year, thanks to those new stores.

In HY24 it opened another 53 stores and in the first several weeks of the second half of FY24 it had opened another nine stores and it recently opened a new store in Dublin, Ireland.

Huge profit growth expected for ASX 200 stock

The broker UBS has predicted that Lovisa can deliver huge profit growth in the next few years.

In FY23, the business generated revenue of $596 million and earnings per share (EPS) of $0.62. UBS suggests that Lovisa could grow its revenue by 18% to $703 million and improve EPS by 12.9% to 70 cents per share in FY24.

Ongoing store growth could help the ASX 200 stock grow its EPS by 134% to $1.45 in FY28 compared to FY23, according to UBS.

The broker suggests Lovisa's revenue could grow by 15.5% to $812 million in FY25 and EPS could rise by 21.4% to 85 cents.

In FY26, UBS suggests Lovisa's revenue could increase by 15.1% to $935 million and EPS could rise 24.7% to $1.06.

FY27 could see the revenue rise by another 15% to $1.075 billion and EPS go up 17.9% to $1.25.  

FY28 could see Lovisa's revenue rise by 13.2% to $1.2 billion, while EPS could go up 16% to $1.45.

Foolish takeaway

There is no guarantee that Lovisa's store network growth will continue at the same growth rate as it has over the past several years.

Lovisa shares have been a strong performer – in the past five years they have risen around 220%. If the store count, revenue and profit keep rising, then Lovisa could be one to watch. However, it has risen significantly in the last six months, so it's not as cheap as it was in November. The market is expecting a lot of success from this business.

Motley Fool contributor Tristan Harrison has positions in Lovisa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Lovisa. 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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