It is unfortunate that man-made climate change is starting to cause visible havoc around the world.
Experts have warned that extreme events like the bushfires in the summer of 2020 and the severe flooding this year will become more frequent, devastating people and animals alike.
This does mean, though, that someone has to do the rebuilding afterwards.
That's why Wilson Asset Management senior equity analyst Sam Koch feels like Johns Lyng Group Ltd (ASX: JLG) is undervalued at the moment.
"We believe the combination of Johns Lyng Group's defensive qualities and superior growth outlook supports a valuation higher than the market," he said in a memo to clients.
"The resiliency of Johns Lyng Group's earnings growth is an attractive quality for shareholders in the current volatile macro-economic environment."
The share price has returned close to 510% over the past five years, but has dipped 14.3% in 2022.
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Business not impacted by economic conditions
Johns Lyng provides construction services for the insurance industry. When a claim is made, the company is sent in to evaluate and repair damaged buildings.
According to Koch, this is an activity that hums along independent of any slowdowns in the wider economy.
"Johns Lyng Group's Australian business provides building insurance and restoration services that are not influenced by the vagaries of the business cycle, whose growth is driven by relationships and service standards," he said.
"A series of unfortunate natural disasters have recently bolstered activity within the sector which, in our view, Johns Lyng Group is well placed to support."
The business has recently entered the strata management industry, which provides a new channel for cross-selling its building services.
Massive addressable market across the Pacific Ocean
However, Koch reckons the US market is where Johns Lyng's "largest medium-term opportunity" lies.
"Following the acquisition of Reconstruction Experts in December 2021, which is a diversified building services provider operating in four states with over four times the population of Australia, Johns Lyng Group now has a platform to roll out its unique model," he said.
"Whilst the opportunity in the US is significant, early results will be key to assess whether the model is replicable and scalable across the country."
Wilson holds Johns Lyng shares in two of its funds — WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).
Those funds are not the only fans of Johns Lyng shares. Eight out of nine analysts surveyed on CMC Markets currently recommend the stock as a strong buy.
According to Koch, the business model helps incentivise all the staff to move in one direction.
"Its unique partnership model with owner-operators drives a strong culture of alignment and excellence, which has been a significant contributor to its overall success."
