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.
We love companies like this because something about their business models makes them special. That said, here are three quality compounders that deserve a spot on your list.
Palantir (PLTR)
Market Cap: $337.8 billion
Started by Peter Thiel after seeing US defence agencies struggle in the aftermath of the 2001 terrorist attacks, Palantir (NYSE: PLTR) offers software as a service platform that helps government agencies and large enterprises use data to make better decisions.
Why Should You Buy PLTR?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 38.6% over the last year
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Strong free cash flow margin of 47.2% enables it to reinvest or return capital consistently
Palantir’s stock price of $142.59 implies a valuation ratio of 88x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
MercadoLibre (MELI)
Market Cap: $125.6 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 Do We Love MELI?
- Has the opportunity to boost monetization through new features and premium offerings as its unique active buyers have grown by 19.7% 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 16.9% annually
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $2,457 per share, MercadoLibre trades at 28.8x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Vertiv (VRT)
Market Cap: $48.92 billion
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Is VRT a Top Pick?
- Average organic revenue growth of 18.5% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Free cash flow margin expanded by 6.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
- Returns on capital are climbing as management makes more lucrative bets
Vertiv is trading at $128.37 per share, or 34.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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 Comfort Systems (+782% 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
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