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 could turbocharge your returns.
Uber (UBER)
Market Cap: $191.9 billion
Notoriously funded with $7.7 billion from the Softbank Vision Fund, Uber (NYSE: UBER) operates a platform of on-demand services such as ride-hailing, food delivery, and freight.
Why Do We Love UBER?
- Has the opportunity to boost monetization through new features and premium offerings as its monthly active platform consumers have grown by 13.9% annually over the last two years
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 183% outpaced its revenue gains
- Free cash flow margin jumped by 17.7 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Uber is trading at $92.51 per share, or 21.8x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Vertiv (VRT)
Market Cap: $40.41 billion
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Should You Buy VRT?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 18.5% over the past two years
- Free cash flow margin increased by 6.5 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
Vertiv’s stock price of $106.72 implies a valuation ratio of 28.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Reddit (RDDT)
Market Cap: $20.89 billion
Founded in 2005 by two University of Virginia roommates, Reddit (NYSE: RDDT) facilitates user-generated content across niche communities (called subreddits) that discuss anything from stocks to dating and memes.
Why Are We Backing RDDT?
- Domestic Daily Active Visitors have grown by 33.5% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Earnings per share grew by 31.6% annually over the last three years, massively outpacing its peers
- Free cash flow margin increased by 38.9 percentage points over the last few years, giving the company more capital to invest or return to shareholders
At $108.02 per share, Reddit trades at 34.9x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out 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 176% over the last five years.
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
