Share prices that go up or down after reporting can be appealing following earnings season results because of the insights and potential value that are revealed. Hence, there are a range of compelling S&P/ASX 200 Index (ASX: XJO) shares that could be top buys right now.
The business I'm going to outline in this article is Johns Lyng Group Ltd (ASX: JLG). This company provides rebuild and restoration services across Australia, New Zealand, and the US. It specialises in providing services after damage caused by insured events, including impact, weather, and fire events.
Clients include major insurance companies, commercial enterprises, local and state governments, body corporates/owners' corporations and retail customers.
Disappointingly for shareholders, the Johns Lyng share price is down 33% in the past month. Whilst painful, I thought the result included a number of positives.
Strong underlying profit growth
In the FY24 result, Johns Lyng reported insurance building and restoration services (IB & RS) business as usual (BAU) revenue rose 9% to $845.3 million, IB&RS BAU earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 20.2% to $111.2 million, and BAU underlying net profit after tax (NPAT-A) grew 37.2% to $55.9 million.
While the company's FY24 result was hampered by a significant reduction in catastrophe revenue, it still managed to deliver an increase of statutory NPAT of 0.8% to $63.3 million.
The ASX 200 share can't control the scale or quantity of its catastrophe work, but the rest of the business performed strongly over the 2024 financial year. The underlying growth reiterated to me the operational leverage the core business has.
Further growth expected in FY25
The company has provided guidance for FY25, which was mixed.
Catastrophe revenue is forecast to fall around 75% to $205.6 million, and catastrophe EBITDA could decline by approximately 77% to $6.3 million. It's possible that an uptick of catastrophes could occur in FY25, leading to an increase in work in 2025 and 2026.
However, FY25 BAU revenue is expected to increase 15.1% to $1.07 billion. And BAU EBITDA is forecast to increase by 8.7% to $131.8 million.
The ASX 200 share also noted a number of positives that were building in FY24 that can help drive the FY25 result.
Johns Lyng pointed to a ramp-up in job volume from recent contract wins and additional targets. It's expecting deeper market services in WA, SA, NT, Tasmania and New Zealand. There's the continuing rollout of Johns Lyng's strata services division, the rollout of additional service lines in the US, revenue synergies from recent acquisitions, additional potential acquisitions and potential future catastrophe events.
Strata services
It's only a small part of the company's overall profit generation at the moment, but I like the defensive and recurring nature of the strata services earnings (and other essential services). The strata segment is becoming more useful as it unlocks synergies with the core division.
Johns Lyng now has the second-largest market share in Australia, at just under 5%. According to Johns Lyng, this highlights how fragmented the strata management industry is and the "significant opportunities for consolidation".
The bolt-on acquisitions of Your Local Strata and AM Strata during the year, as well as the acquisition of SSKB Strata soon after the end of FY24, helped expand the ASX 200 share's current portfolio to more than 145,000 lots under management.
Foolish takeaway
According to Commsec, the Johns Lyng share price is now valued at 18x FY26's estimated earnings. This seems like good value to me.
