3 quality compounders for long-term investors

A quality compounder is a business that not only sports durable competitive advantages but also builds on its success by consistently reinvesting its profits at high returns.

Companies with these characteristics are our definition of a “blue-chip”. On that note, here are three quality compounders that could turbocharge your returns.

Sea (SE)

Market cap: $45.33 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?

1. Has the opportunity to boost monetization through new features and premium offerings as its paying users have grown by 21.2% annually over the last two years

2. 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 15.5% annually

3. Earnings per share have massively outperformed its peers over the last three years, increasing by 25.8% annually

Sea’s stock price of $74.15 implies a valuation ratio of 3.1x forward price-to-gross profit. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Monster (MNST)

Market cap: $90.98 billion

Founded in 2002 as a natural soda and juice company, Monster Beverage (NASDAQ:MNST) is a pioneer of the energy drink category, and its Monster Energy brand targets a young, active demographic.

Why Will MNST Beat the Market?

1. Healthy operating margin of 28.6% shows it’s a well-run company with efficient processes, and its operating leverage amplified its profits over the last year

2. Robust free cash flow margin of 23.4% gives it many options for capital deployment

3. Industry-leading 35.4% return on capital demonstrates management’s skill in finding high-return investments, and its returns are growing as it capitalizes on even better market opportunities

At $46.44 per share, Monster trades at 37.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Woodward (WWD)

Market cap: $18.05 billion

Initially designing controls for water wheels in the early 1900s, Woodward (NASDAQ:WWD) designs, services, and manufactures energy control products and optimization solutions.

Why Will WWD Outperform?

1. Impressive 13.7% annual revenue growth over the last five years indicates it’s winning market share this cycle

2. Operating margin expanded by 6.7 percentage points over the last five years as it scaled and became more efficient

3. Share buybacks catapulted its annual earnings per share growth to 22.5%, which outperformed its revenue gains over the last two years