A rare buying opportunity in 1 of Australia's top shares?

This stock has an excellent outlook. I think it's a buy!

I'm going to outline why the ASX share Collins Foods Ltd (ASX: CKF) is one of Australia's top shares and has an appealing future for investors.

Collins Foods is a large KFC franchisee operator with sizeable outlet networks in both Australia and Europe.

In my view, there are not many ASX shares we can point to that are successfully growing in Europe, which is a large market with more growth potential than Australia due to its larger population.

I'll outline three reasons this is such a compelling long-term idea.

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Image source: Getty Images

Growing locally and internationally

The company regularly expands its KFC outlet count in Australia and Europe, enabling it to reach more customers and deliver greater scale benefits.

During FY26, it opened a net of seven stores in Australia (taking its count to 295 nationally), it grew by a net of one in the Netherlands and it opened one new restaurant in Germany.

The company is currently focusing on ensuring that new restaurants will be profitable during this economically challenging period for consumers. But it expects growth in the growth of new stores to accelerate.

In the four weeks before its AGM update, the company reported total KFC sales growth of 5% for Australia, 4.9% for the Netherlands and 58.8% for Germany. In my view, the company is making pleasing progress and this is helping revenue as well as its other financial figures.

Improving financials

I think one of the best signs of being one of Australia's top shares is seeing profit margins increase as the company grows. Investors usually judge a business based on its net profit generation, and it's the profit that pays for the dividend.

Everything that helps a company grow earnings sustainably is an excellent sign.

FY26 was a great example of the company's ability to deliver rising profits.

During the 2026 financial year, revenue grew by 8.6% to $1.59 billion, underlying operating profit (EBIT) climbed by 10.1% to $130.7 million and underlying net profit after tax (NPAT) jumped 13% to $61.4 million.

As long as the company can continue delivering positive same-store sales growth, I'm optimistic about its ability to grow margins in the future.

The result helped the business fund a 7.7% increase of its annual dividend per share to 28 cents per share.

The valuation is appealing for one of Australia's top shares

At the time of writing, the Collins Foods share price has fallen 23% in 2026 to date, making the business much cheaper for potential investors.

According to the projection on CMC Invest, the ASX share is now valued at 15x FY27's estimated earnings and under 13x FY28's estimated earnings. It could also pay a grossed-up dividend yield of 5.1%, including franking credits, for FY27.

Overall, I think this could be a great time to invest in Collins Foods shares for the long-term.

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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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