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 could amplify your portfolio’s returns.
Vertiv (VRT)
Market Cap: $99.05 billion
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Do We Love VRT?
- Average organic revenue growth of 21.9% over the past two years demonstrates its ability to expand independently without relying on acquisitions
- Free cash flow margin jumped by 16 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Rising returns on capital show management is finding more attractive investment opportunities
Vertiv is trading at $258.29 per share, or 43.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Trane Technologies (TT)
Market Cap: $93.49 billion
With low-pressure heating systems as its first product, Trane (NYSE: TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers.
Why Will TT Beat the Market?
- Impressive 11.4% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Share buybacks catapulted its annual earnings per share growth to 20.2%, which outperformed its revenue gains over the last two years
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its rising returns show it’s making even more lucrative bets
Trane Technologies’s stock price of $422.41 implies a valuation ratio of 28.5x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Eli Lilly (LLY)
Market Cap: $880 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 Are We Backing LLY?
- Annual revenue growth of 38.2% over the past two years was outstanding, reflecting market share gains this cycle
- Adjusted operating margin expanded by 21.2 percentage points over the last two years as it scaled and became more efficient
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
At $983.75 per share, Eli Lilly trades at 28.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 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.
