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. On that note, here are three quality compounders that deserve a spot on your list.
Netflix (NFLX)
Market Cap: $431.7 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 Does NFLX Stand Out?
- 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 increased by 18.4 percentage points over the last few years, giving the company more capital to invest or return to shareholders
At $94.36 per share, Netflix trades at 2.8x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
MercadoLibre (MELI)
Market Cap: $101.7 billion
Originally started as an online auction platform, MercadoLibre (NASDAQ: MELI) is a one-stop e-commerce marketplace and fintech platform in Latin America.
Why Are We Backing MELI?
- Has the opportunity to boost monetization through new features and premium offerings as its unique active buyers have grown by 21.7% annually over the last two years
- Grip over its ecosystem is highlighted by its ability to grow engagement while increasing the average revenue per user by 13.9% annually
- Strong free cash flow margin of 32.7% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety
MercadoLibre’s stock price of $2,006 implies a valuation ratio of 20.3x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Hubbell (HUBB)
Market Cap: $24.18 billion
A respected player in the electrical segment, Hubbell (NYSE: HUBB) manufactures electronic products for the construction, industrial, utility, and telecommunications markets.
Why Will HUBB Outperform?
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share buybacks catapulted its annual earnings per share growth to 18.1%, which outperformed its revenue gains over the last five years
- Free cash flow margin jumped by 6.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Hubbell is trading at $454.91 per share, or 23.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-small-cap company Exlservice (+354% 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.
