Quality compounders are well-oiled machines. Their competitive advantages allow them to make profits consistently and reinvest them into projects that generate even more profits, creating a virtuous cycle of returns.
We love companies like this because something about their business models makes them special. Keeping that in mind, here are three quality compounders that deserve a spot on your list.
Netflix (NFLX)
Market Cap: $346 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 Do We Love NFLX?
- Has the opportunity to boost monetization through new features and premium offerings as its global streaming paid memberships have grown by 15.6% annually over the last two years
- Share buybacks catapulted its annual earnings per share growth to 49.2%, which outperformed its revenue gains over the last three years
- Free cash flow margin increased by 16.2 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Netflix’s stock price of $81.82 implies a valuation ratio of 19.6x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Vertiv (VRT)
Market Cap: $115.4 billion
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Are We Backing VRT?
- Average organic revenue growth of 23.7% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Free cash flow margin increased by 22.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Improving returns on capital reflect management’s ability to monetize investments
At $297.20 per share, Vertiv trades at 47.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
EMCOR (EME)
Market Cap: $36.33 billion
Through its network of over 70 subsidiaries, EMCOR (NYSE: EME) provides electrical, mechanical, and building construction and services
Why Is EME a Good Business?
- Annual revenue growth of 16.3% over the past two years was outstanding, reflecting market share gains this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 40.2% to outpace its revenue gains
- Rising returns on capital show management is finding more attractive investment opportunities
EMCOR is trading at $816.88 per share, or 28.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
