Smaller S&P/ASX All Ordinaries Index (ASX: XAO) shares can be contenders for delivering big returns.
It's not unusual for smaller businesses to trade at a much lower valuation than they would if they were larger, because so few analysts and fund managers cover them, leading to undervaluation.
The valuations of the two businesses below make them appealing, in my view, as long-term buys.
Australian Ethical Investment Ltd (ASX: AEF)
Australian Ethical is a fund manager that aims to provide investors with exposure to investments that have a high level of 'ethics' by excluding certain sectors from its investment strategy.
A key reason why I believe the company has such a good outlook is that it has a superannuation offering, which is benefiting from the ongoing contributions from members.
The ASX All Ords share's superannuation segment, which is where the significant majority of funds under management (FUM) sits, saw net inflows of $0.11 billion in the three months to 31 December 2025. Its total FUM was $14.08 billion at the end of 2025.
Australian Ethical notes that it "continues to be recognised for its leadership in ethical investing, winning Money Magazine's 2026 best of the best awards for best ESG superannuation product and best ESG pension product, reinforcing Australian Ethical's position at the forefront of sustainable investing and highlighting the organisation's ongoing commitment to positive impact and industry best practice."
The ASX All Ord stock's Managing Director, John McMurdo, recently said:
Despite challenging investment market conditions, it's been a pleasing first half of the year. On the superannuation side, we've seen changes to our digital marketing capability delivering an increase in new member joins in Q2, and with the completion of our transition to GROW, we are realising cost efficiencies and can focus on uplifting the member experience to support continued growth. The solid pipeline we've built in our newer channels, as well as upcoming product innovation also positions us well for ongoing success and continued growth into the second half of the year.
Australian Clinical Labs Ltd (ASX: ACL)
This business describes itself as Australia's leading private provider of pathology services. Its laboratories perform a range of tests each year for clients, including doctors, specialists, patients, hospitals, and corporate clients.
The Australian Clinical Labs share price is down by around 30% since February 2025, as the chart below shows, making it much better value. It was pleasing to see that management thought the ASX All Ords share was undervalued last year and launched a share buyback to buy up to 10% of its shares on issue.
Healthcare is a good, defensive sector to be invested in, yet the business is trading on such a low price-earnings (P/E) ratio. According to the forecast on CMC Markets, the business could generate earnings per share (EPS) of 18 cents in FY26.
That means it's trading at 14x FY26's estimated earnings. Analyst projections suggest the EPS could climb to 20.5 cents in FY27 and then 22 cents in FY28. That implies earnings could climb 22% between FY26 to FY28. The dividend is also expected to grow in the next few years to 15 cents per share in FY28.
