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 with these characteristics are our definition of a "blue-chip". On that note, here are three quality compounders that could amplify your portfolio’s returns.
Meta (META)
Market Cap: $1.77 trillion
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ: META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
Why Is META a Good Business?
- Monetization efforts are paying off as its average revenue per user has grown by 13.3% annually over the last two years
- Highly efficient business model is illustrated by its impressive 59.9% EBITDA margin, and its profits increased over the last few years as it scaled
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $696.30 per share, Meta trades at 15.9x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Duolingo (DUOL)
Market Cap: $21.59 billion
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ: DUOL) is a mobile app helping people learn new languages.
Why Should You Buy DUOL?
- Has the opportunity to boost monetization through new features and premium offerings as its monthly active users have grown by 39.8% annually over the last two years
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 178% annually, topping its revenue gains
- Strong free cash flow margin of 34.4% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
Duolingo’s stock price of $470 implies a valuation ratio of 76.7x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Sea (SE)
Market Cap: $93.65 billion
Founded in 2009 and a publicly traded company since 2017, Sea (NYSE: SE) started as a gaming platform and has since expanded to offer a variety of services such as e-commerce, digital payments, and financial services across Southeast Asia.
Why Are We Bullish on SE?
- Paying Users have grown by 10.2% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Switching costs of its platform were on full display over the last two years as it not only grew engagement but also increased the average revenue per user by 11.7% annually
- Free cash flow margin jumped by 27.3 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Sea is trading at $157.79 per share, or 41.8x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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 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-micro-cap company Kadant (+351% 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
