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. That said, here are three quality compounders that could turbocharge your returns.
The Trade Desk (TTD)
Market Cap: $33.01 billion
Founded by former Microsoft engineers Jeff Green and Dave Pickles, The Trade Desk (NASDAQ: TTD) offers cloud-based software that uses data to help advertisers better plan, place, and target their online ads.
Why Should You Buy TTD?
- Billings growth has averaged 27.4% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 17.5%, and its operating leverage amplified its profits over the last year
At $65.49 per share, The Trade Desk trades at 11.7x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.
Airbnb (ABNB)
Market Cap: $88.59 billion
Founded by Brian Chesky and Joe Gebbia in their San Francisco apartment, Airbnb (NASDAQ: ABNB) is the world’s largest online marketplace for lodging, primarily homestays.
Why Will ABNB Outperform?
- Nights and Experiences Booked are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Share repurchases over the last three years enabled its annual earnings per share growth of 112% to outpace its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its recently improved profitability means it has even more resources to invest or distribute
Airbnb is trading at $140.05 per share, or 21.5x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Doximity (DOCS)
Market Cap: $13.04 billion
Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.
Why Will DOCS Beat the Market?
- Average billings growth of 20.3% over the last year enhances its liquidity and shows there is steady demand for its products
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- DOCS is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Doximity’s stock price of $68.97 implies a valuation ratio of 22.8x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
