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.
Companies such as these set the gold standard in public market investing. On that note, here are three quality compounders that could amplify your portfolio’s returns.
Robinhood (HOOD)
Market Cap: $68.93 billion
With a mission to democratize finance, Robinhood (NASDAQ: HOOD) is an online consumer finance platform known for its commission-free stock and crypto trading.
Why Will HOOD Outperform?
- Customers are spending more money on its platform as its average revenue per user has increased by 143% annually over the last two years
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 95.7% annually, topping its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety
Robinhood is trading at $76.45 per share, or 23.2x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Reddit (RDDT)
Market Cap: $32.55 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 Bullish on RDDT?
- Has the opportunity to boost monetization through new features and premium offerings as its domestic daily active visitors have grown by 38.8% annually over the last two years
- Strong engagement trends coupled with 34.8% annual growth in its average revenue per user demonstrate its platform’s stickiness with die-hard customers
- RDDT is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
At $169.35 per share, Reddit trades at 20.3x forward EV/EBITDA. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Eli Lilly (LLY)
Market Cap: $863.1 billion
Founded in 1876 by a Civil War veteran and pharmacist frustrated with the poor quality of medicines, Eli Lilly (NYSE: LLY) discovers, develops, and manufactures pharmaceutical products for conditions including diabetes, obesity, cancer, immunological disorders, and neurological diseases.
Why Should You Buy LLY?
- Market share has increased this cycle as its 41.8% annual revenue growth over the last two years was exceptional
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 29.6% exceeded its revenue gains over the last five years
- Rising returns on capital show management is finding more attractive investment opportunities
Eli Lilly’s stock price of $965.29 implies a valuation ratio of 26.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum - both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks - FREE. Get Our Strong Momentum Stocks for Free HERE.
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
