These 2 ASX shares could win big time in the long term

I think these stocks have very appealing outlooks.

| More on:
A happy young boy in a wheelchair holds his arms outstretched as another boy pushed him.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I've invested in two S&P/ASX 200 Index (ASX: XJO) shares that add a particular quality to the balance of my portfolio.

Australia is a wonderful country, but if a company can successfully expand overseas, it can significantly increase its addressable market.

That's why I believe both of the companies below will make a lot more profit in the next three to five years. Let's take a look.

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is a retailer of affordable jewellery aimed at younger shoppers. The ASX retail share has successfully expanded its store network beyond Australia.

Its two most significant markets are Australia, with 175 stores, and the United States, with 207 stores. Lovisa has opened at least 10 stores in many other countries, including New Zealand, Singapore, Malaysia, South Africa, the United Kingdom, France, Germany, Poland, and Belgium.

Excitingly, the ASX share has just entered some large markets like China and Vietnam. Lovisa can expand its store network in whichever existing (or new) market it sees opportunities in.

In the 12 months to 31 December 2023, the business reported its store network grew by 139 stores, helping the HY24 earnings before interest and tax (EBIT) increase by 16.3% to $81.6 million.

As the company grows internationally, I think its store count can double in the next five years, which could lead to roughly doubling of net profit, too, because of the scale benefits of more stores in countries where it's already operating.

According to Commsec's earnings forecast, the Lovisa share price is valued at 27x FY26's estimated earnings.

Johns Lyng Group Ltd (ASX: JLG)

Johns Lyng provides building and restoration services across Australia and the US. Its core offering is rebuilding and restoring various properties and contents after damage by insured events, including impact, weather, and fire events.

It also has a division involved in catastrophe work in Australia and the US.

The FY24 first-half result saw the ASX share's insurance building and restoration services (IB & RS) division revenue rise 13.7% to $426.1 million, and the business as usual (BAU) IB & RS earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 28.1% to $55 million.

Double-digit growth for the core segment makes me optimistic the company can compound its earnings for several years ahead.

I think the company's geographic expansion is compelling. The US is a vast market, and the ASX share was recently appointed to the Allstate emergency response and mitigation panel. Allstate is one of the largest insurance companies in the US.

Johns Lyng has also recently expanded into the New Zealand market, opening up another growth avenue. I'm not relying on this, but it's possible the ASX share could expand to additional countries in the future.

I also like the company's move to expand into the strata management sector through acquisitions to diversify and grow earnings — it could unlock beneficial synergies between its business segments.

According to the estimate on Commsec, the Johns Lyng share price is valued at 23x FY26's estimated earnings.

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

More on Opinions

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Opinions

Should you buy Brickworks or Soul Patts shares today?

Both are solid companies to invest in, but if I must choose one, I will go with this ASX share.

Read more »

Three women cruise along enjoying ice-creams in the sunshine.
Dividend Investing

Passive income powerhouses! 3 ASX shares I'd consider buying for rising dividends

Here are three ASX dividend shares that I think are worth considering today.

Read more »

Man waiting for his flight and looking at his phone.
Growth Shares

Near its 52-week low, this ASX growth stock could be the bargain of the year!

I think this stock could be a leading opportunity.

Read more »

Two kids in superhero capes.
Small Cap Shares

2 ASX small-cap shares I'd buy for massive growth potential

I’m bullish about these two stocks.

Read more »

a man at the wheel of car with dashboard in view, driver technology shares,
Opinions

Is this ASX All Ords retail stock too cheap to ignore?

It's tough to be a retailer, but is the market punishing this ASX small cap share too much?

Read more »

Three kids with attitude
Opinions

3 lower-risk ASX shares I think are perfect for beginners

Here are three ASX shares that are ideal for risk averse investors, in my opinion.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Opinions

Why I'm planning to buy Guzman y Gomez shares and own for the long-term

I think this business has a strong outlook.

Read more »

Two people comparing and analysing material.
Opinions

Are BHP or Wesfarmers shares a better buy?

Should investors be more interested in the owner of Bunnings or Australia’s biggest miner?

Read more »