S&P/ASX 200 Index (ASX: XJO) shares are typically strong businesses in their sectors and have the ability to achieve strong profit margins. I like companies that are delivering pleasing growth already and have good long-term outlooks.
Names like Commonwealth Bank of Australia (ASX: CBA) and Woolworths Group Ltd (ASX: WOW) already have a huge presence in the banking and supermarket sectors (respectively), and I can't see them growing their market share or margins significantly from here due to competition.
However, the two businesses below have lots of room to grow, in my opinion.
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Sonic Healthcare Ltd (ASX: SHL)
This company is a large, international pathology business. It's also involved in radiology, general practice medicine, and corporate medical services.
Across its business, its diagnostic and clinical services are provided by 1,800 pathologists and radiologists, as well as over 17,000 medical scientists, radiographers, sonographers, technicians, and nurses. The board and management are also highly experienced medical personnel.
The business has a presence in a number of countries, including Australia, New Zealand, the US, the UK, Switzerland, and Germany.
It delivered solid results in FY25, with revenue growth of 8% to $9.6 billion, 8% operating profit (EBITDA) growth to $1.72 billion, net profit growth of 7% to $514 million, and operating cash flow growth of 21% to $1.3 billion.
The ASX 200 share expects to grow its EBITDA by around 13% in FY26. I think it could be an appealing investment at its current valuation, given its earnings growth potential. Earnings supports include ageing populations and growing populations in its key markets, increased usage of AI throughout its business, additional acquisitions, and new types of pathology methods.
In a decade, I believe the business could be larger and more profitable for shareholders.
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is one of my favourite businesses in the retail space. It sells hundreds of thousands of products on its website, though a majority of those items are shipped directly by suppliers. This allows the business to sell a wider range of items and operate with a capital-light model.
Its operating model enables the business to generate a pleasing cash flow and invest heavily in further growth.
The FY25 result displayed a number of strong positives, with a 16% rise in active customers, 21% revenue growth to $601 million, and 43% growth of operating profit (EBITDA) to $18.8 million.
Operating leverage and AI are helping the business achieve stronger margins. Fixed costs as a percentage of revenue improved to 10.6% in FY25, down from 11.3% in FY24.
The ASX 200 share is tracking to plan across all of its long-term strategic goals, including its medium-term goal of at least $1 billion in annual revenue.
Temple & Webster said the Australian furniture and homewares market has 20% online penetration, compared to 35% in the US market and 29% in the UK market. That suggests further potential market share gains in the coming years.
Further upside for the business could be achieved through trade and commercial sales, international expansion, and new ventures.
It achieved an EBITDA margin of 3.1% in FY25, with expectations of between 3% to 5% in FY26. In the longer term, it's aiming for an EBITDA margin of at least 15%. Combined with rapidly rising revenue, I believe the ASX 200 share could become an even stronger presence in the coming years.
