The ASX is home to some very impressive Australian stocks. Some are the best in the country at what they do, or even the best in the world.
I'm going to highlight two businesses that I believe are undervalued and have excellent long-term growth potential, in my view.
While they may not be the cheapest Australian stocks in price/earnings (P/E) ratio terms, I think future profit growth will help them deliver market-beating total shareholder returns (TSR).
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Breville Group Ltd (ASX: BRG)
Breville is one of the world's leading coffee machine businesses. It has a number of brands including Breville, Sage, Lelit, Baratza and a coffee beans business called Beanz. Coffee seems like of the things that Australia is a world leader at.
The global adoption of coffee continues to be a strong tailwind for the company. FY26 revenue grew by 6.7% (with global segment growth of 9.7% in constant currency).
Breville said that its young markets of China, South Korea, Mexico and the Middle East delivered collective growth of more than 70%.
Tariffs have been a significant talking point for the last year and a half for the Australian stock (and other affected businesses). Breville's manufacturing diversification has been substantially complete, with 85% of 120-volt product in gross profit dollar terms is now sourced outside of China.
The company also reported that its FY26 second half gross profit margin was 36.8%, above FY25's 36.6%, primarily driven by the US sourcing mix.
While profitability was impacted during FY26, it still managed to deliver growth, even if it was a small increase at 1.7%. It was enough to fund a 2.7% increase in the dividend per share to 38 cents.
The projection on Commsec suggests the company's earnings per share (EPS) could climb to $1.08 by FY27, putting the Australian stock at 28x FY27's estimated earnings.
Estimates also suggest that EPS could grow by 28% between FY27 and FY29. The company is on track for a promising future.
Wesfarmers Ltd (ASX: WES)
The other Australian stock I want to highlight is Wesfarmers, the owner of Bunnings, Kmart, Officeworks, Priceline and other businesses. I'd describe Bunnings as one of the most 'Australian' businesses you could want to own.
Wesfarmers has proven to be very effective at delivering earnings growth over the years thanks to the quality of Bunnings and Kmart. They both have incredibly high returns on capital (ROC) for physical retailers and have managed to find a number of appealing places to invest to grow their earnings.
For example, Bunnings has invested in product ranges such as pet care and auto care, allowing it to compete with leaders in those respective segments.
As value leaders, Kmart and Bunnings are well-placed to serve customers during this period of a higher cost of living, which I believe will lead to a rising market share.
Wesfarmers' return on equity (ROE) above 30% shows how profitably it puts new money to work. Over the long term, I think Wesfarmers' earnings per share (EPS) can grow, particularly as it expands in areas like lithium and healthcare, both of which are growth areas.
According to the projection on Commsec, the Australian stock is valued at 27x FY27's estimated earnings.
