3 Quality Compounders Worth Investigating

May 01, 2025 at 00:35 AM EDT

TOST Cover Image

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 with these characteristics are our definition of a "blue-chip". Keeping that in mind, here are three quality compounders that could turbocharge your returns.

Toast (TOST)

Market Cap: $20.46 billion

Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE: TOST) provides integrated point-of-sale (POS) hardware, software, and payments solutions for restaurants.

Why Do We Like TOST?

ARR growth averaged 30.6% over the last year, showing customers are willing to take multi-year bets on its offerings
Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently

At $35.88 per share, Toast trades at 3.5x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.

DoorDash (DASH)

Market Cap: $81.03 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 Is DASH a Good Business?

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
Highly efficient business model is illustrated by its impressive 16% EBITDA margin, and its rise over the last few years was fueled by some leverage on its fixed costs
Additional sales over the last three years increased its profitability as the 124% annual growth in its earnings per share outpaced its revenue

DoorDash is trading at $194 per share, or 31.1x forward EV-to-EBITDA. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Lululemon (LULU)

Market Cap: $32.66 billion

Originally serving yogis and hockey players, Lululemon (NASDAQ: LULU) is a designer, distributor, and retailer of athletic apparel for men and women.

Why Will LULU Beat the Market?

Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 8.2% over the past two years
Collection of products is difficult to replicate at scale and results in a best-in-class gross margin of 58.8%
Strong free cash flow margin of 16% enables it to reinvest or return capital consistently

Lululemon’s stock price of $270.42 implies a valuation ratio of 17.6x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.