S&P/ASX 200 Index (ASX: XJO) growth stocks can be some of the best performers over the long term. The power of compounding can really help drive earnings higher over time.
Companies that can successfully tap into the global economy can grow their profit significantly. Some ASX businesses are focused mainly on the domestic market – Australia is a great country, but it has a relatively small population.
When I look at some of the ASX's best performers over the past decade, there's certainly been a strong international aspect to their success. I'm thinking about names like Pro Medicus Ltd (ASX: PME), WiseTech Global Ltd (ASX: WTC), Altium and TechnologyOne Ltd (ASX: TNE).
I'm going to talk about two ASX 200 growth stocks that analysts think have plenty of growth potential.
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Lovisa Holdings Ltd (ASX: LOV)
Lovisa is a retailer that sells affordable jewellery to younger shoppers in Australia and multiple other countries.
At the end of the FY24 first half, it had at least 10 stores in markets like Australia (175 stores), New Zealand (27), Singapore (15), Malaysia (43), South Africa (77), the UK (47), France (80), Germany (51), Belgium (13), Poland (19), the USA (2017) and Canada (10).
In the six months to 31 December 2023, the ASX 200 growth stock added 53 net new stores. Adding more stores globally can provide the foundation for strong earnings growth in FY25 and beyond.
The broker UBS has predicted that Lovisa could generate $81 million of net profit after tax (NPAT) in FY24, which could be year over year growth of 19%. Lovisa is then predicted to deliver 31% profit growth to $106 million in FY25.
The broker predicts Lovisa could achieve NPAT of $172 million by FY28, which would represent growth of more than 100% compared to FY24.
The Lovisa share price is valued at 21x FY28's estimated earnings.
Xero Ltd (ASX: XRO)
Xero is one of the world's leading cloud accounting software businesses. It helps accountants and business owners save time with various automation tools, can help with various business operations, and presents information in a very understandable way.
The ASX 200 growth stock is doing really well at growing subscribers around the world, particularly in its key markets of the UK and Australia.
In the FY24 result, the business delivered total subscriber growth of 11% to 4.16 million, average revenue per user (ARPU) growth to $39.29 and operating revenue jumped 22% to $1.7 billion. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) soared 75% to $526.5 million and it made $174.6 million of net profit.
Xero recently decided to increase prices for its Australian and UK subscribers, which could help accelerate profit in the coming years.
UBS suggests Xero's net profit could jump 37% to $240 million. The broker forecasts the ASX 200 growth stock could reach a net profit of $987 million in FY29, which would be growth of 464% compared to FY24.
