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". That said, here are three quality compounders that could amplify your portfolio’s returns.
Robinhood (HOOD)
Market Cap: $88.78 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 Do We Love HOOD?
- Customers are spending more money on its platform as its average revenue per user has increased by 40.9% annually over the last two years
- Additional sales over the last three years increased its profitability as the 54.6% annual growth in its earnings per share outpaced its revenue
- HOOD is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business
Robinhood’s stock price of $99.29 implies a valuation ratio of 42.8x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Comfort Systems (FIX)
Market Cap: $24.48 billion
Formed through the merger of 12 companies, Comfort Systems (NYSE:FIX) provides mechanical and electrical contracting services.
Why Will FIX Outperform?
- Backlog has averaged 29.5% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Share repurchases over the last two years enabled its annual earnings per share growth of 69.7% to outpace its revenue gains
- Returns on capital are growing as management capitalizes on its market opportunities
Comfort Systems is trading at $699.95 per share, or 34.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Reddit (RDDT)
Market Cap: $35.31 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 Backing RDDT?
- Domestic Daily Active Visitors have increased by an average of 33.7% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Earnings per share grew by 38.6% annually over the last three years and trumped its peers
- Free cash flow margin grew by 35.1 percentage points over the last few years, giving the company more chips to play with
At $187.20 per share, Reddit trades at 49.2x forward EV/EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
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