Can this ASX 200 stock deliver 'double-digit growth' for many years to come'?

This could be a sparkling opportunity to invest in.

| More on:
A woman stares directly ahead wearing diamond earrings, diamond necklace and diamond bracelet. as the Lovisa share price rises

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

sdf

There aren't many S&P/ASX 200 Index (ASX: XJO) stocks that are growing internationally as much as jewellery business Lovisa Holdings Ltd (ASX: LOV) is. One fund manager thinks that the business is a long-term opportunity.

The business aims to provide on-trend fashion jewellery at "ready-to-wear" prices. At the end of FY23, the business had a total of 801 stores, with 168 in Australia, 190 in the USA, 75 in South Africa, 47 in Germany and 44 in the UK. It has a small number of stores in a range of countries including Italy, Canada, Mexico, Spain, the Netherlands, Hong Kong and so on.

Why is the ASX 200 stock an opportunity?

The fund manager Monash Investors runs a number of different funds, including a fund aimed at ASX small-cap shares. The fund is aimed at investors with a high risk and return profile, with the fund being prepared to accept high risk in the pursuit of capital growth with a medium to long investment timeframe.

Monash Investors suggests that we're now near the end of increases in interest rates and that "this headwind on equity markets will fade". The fund manager said that while another one or even two rate increases are possible, "the heavy lifting has been done".

In September, the Monash Investors small cap fund suffered the pain of declines for ASX consumer discretionary shares, including Lovisa.

The fund manager said that the outlook for Lovisa (and a couple of others) "remains compelling, driven by stock-specific opportunities."

What's the opportunity with Lovisa? The ASX 200 stock has an "enormous" store roll-out opportunity according to the investment team.

The roll-out of these stores could be "lumpy", but it will "underpin strong high double-digit growth for many years to come."

How quickly can Lovisa grow its store count?

Lovisa itself has acknowledged that a key driver of growth is the continued global store roll-out. It opened 172 stores during FY23, taking the store network to 801 stores across 39 countries.

In FY23 it entered 12 new markets including Hong Kong, Taiwan, Namibia, Botswana, Mexico, Italy, Romania, Hungary, Spain and new franchise markets of Columbia, Peru and Morocco. It opened in Poland and Canada at the end of FY22.

In Australia, the ASX 200 stock said it had 168 stores at the end of FY23, yet in countries with much larger populations, its ratio of stores to people is much lower – in the USA it had 190 stores at June 2023, in the UK it had 44 and in Mexico it had four.

Lovisa share price valuation snapshot

According to the profit projections on Commsec, the Lovisa share price is valued at 25 times FY24's estimated earnings.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.

More on Retail Shares

A warehouse worker is standing next to a shelf and using a digital tablet.
Retail Shares

The pros and cons of buying Wesfarmers shares this month

There’s a lot to think about with this impressive retail giant…

Read more »

a woman wearing fashionable clothes and jewellery checks her phone with a satisfied smile on her face in a luxurous home setting.
Retail Shares

Why I think this ASX small-cap stock is a bargain at $7.85

I think this small company has big potential.

Read more »

A happy young couple celebrate a win by jumping high above their new sofa.
Retail Shares

Overinvested in Wesfarmers shares? Here are two alternative ASX retail stocks

These stocks could complement an investment in Wesfarmers.

Read more »

Happy shopper at a clothes shop.
Retail Shares

The share price of this All Ords stock has jumped higher again. Here's why

Here's why Myer's share price is outperforming.

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Retail Shares

Wesfarmers shares recently hit a 52-week high. Can they go higher?

This business continues to impress investors.

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
Retail Shares

Would Warren Buffett buy Lovisa shares right now?

Is this a sparkly opportunity?

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

a thoughtful shopper with shopping bags wearing sparkly gold dress and matching shoes reclines on a chair with hand to chin in thought.
Retail Shares

Can Lovisa's new high profile CEO take Lovisa shares to new heights?

Is Lovisa about to embark on a new era of growth?

Read more »