A quality compounder is a business that not only sports durable competitive advantages but also builds on its success by consistently reinvesting its profits at high returns.
Companies such as these set the gold standard in public market investing. Keeping that in mind, here are three quality compounders that deserve a spot on your list.
Meta (META)
Market Cap: $1.79 trillion
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
Why Will META Outperform?
- Monetization efforts are paying off as its average revenue per user has grown by 14.5% annually over the last two years
- Share buybacks catapulted its annual earnings per share growth to 31.8%, which outperformed its revenue gains over the last three years
- Robust free cash flow margin of 29.2% gives it many options for capital deployment
At $711.90 per share, Meta trades at 15.2x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Netflix (NFLX)
Market Cap: $490.1 billion
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
Why Are We Backing NFLX?
- Global Streaming Paid Memberships are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin grew by 19.9 percentage points over the last few years, giving the company more chips to play with
Netflix is trading at $1,153 per share, or 33.3x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Philip Morris (PM)
Market Cap: $238.6 billion
Founded in 1847, Philip Morris International (NYSE:PM) manufactures and sells a wide range of tobacco and nicotine-containing products, including cigarettes, heated tobacco products, and oral nicotine pouches.
Why Will PM Beat the Market?
- Average unit sales growth of 3% over the past two years reflects steady demand for its products
- Products command premium prices and result in a best-in-class gross margin of 65.3%
- Strong free cash flow margin of 25.3% enables it to reinvest or return capital consistently
Philip Morris’s stock price of $153.27 implies a valuation ratio of 19.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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