Quality compounders are flywheels. Said differently, they’re businesses that generate heaps of profits and consistently reinvest them to produce even more profits. Rinse and repeat.

Companies such as these set the gold standard in public market investing. Keeping that in mind, here are three quality compounders that could turbocharge your returns.

Datadog (DDOG)

Market Cap: $34.95 billion

Named after a database the founders had to painstakingly look after at their previous company, Datadog (NASDAQ: DDOG) is a software-as-a-service platform that makes it easier to monitor cloud infrastructure and applications.

Why Are We Bullish on DDOG?

1. ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
2. Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
3. DDOG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

At $103.99 per share, Datadog trades at 11.5x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

Shopify (SHOP)

Market Cap: $120.4 billion

Originally created as an internal tool for a snowboarding company, Shopify (NYSE: SHOP) provides a software platform for building and operating e-commerce businesses.

Why Are We Backing SHOP?

1. Payment activity on its platform is soaring as its TPV growth averaged 31.8% over the last year, enabling the company to collect more fees and upsell additional services like banking
2. Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
3. Operating margin improvement of 32.2 percentage points over the last year demonstrates its ability to scale efficiently

Shopify is trading at $96.60 per share, or 11.1x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.

DoorDash (DASH)

Market Cap: $77.18 billion

Founded by Stanford students with the intent to build “the local, on-demand FedEx", DoorDash (NYSE: DASH) operates an on-demand food delivery platform.

Why Will DASH Beat the Market?

1. Orders have increased by an average of 22.1% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
2. Disciplined cost controls and effective management resulted in a strong two-year EBITDA margin of 16%, and it turbocharged its profits by achieving some fixed cost leverage
3. Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 124% outpaced its revenue gains

DoorDash’s stock price of $188.40 implies a valuation ratio of 29.7x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full 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 5 Growth Stocks for this month. 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 Axon (+711% five-year return). Find your next big winner with StockStory today for free.