3 Quality Compounders to Own for Decades

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 deserve a spot on your list.

Doximity (DOCS)

Market Cap: $10.67 billion

Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.

Why Is DOCS a Good Business?

1. Average billings growth of 20.3% over the last year enhances its liquidity and shows there is steady demand for its products
2. Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends

Doximity’s stock price of $57.71 implies a valuation ratio of 18.6x forward price-to-sales. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Chipotle (CMG)

Market Cap: $68.07 billion

Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE:CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.

Why Do We Love CMG?

1. Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
2. Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 6.2% over the past two years
3. Massive revenue base of $11.49 billion makes it a household name that influences purchasing decisions

Chipotle is trading at $50.46 per share, or 38.5x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.

Texas Roadhouse (TXRH)

Market Cap: $11.02 billion

With locations often featuring Western-inspired decor, Texas Roadhouse (NASDAQ:TXRH) is an American restaurant chain specializing in Southern-style cuisine and steaks.

Why Are We Bullish on TXRH?

1. Rapid rollout of new restaurants to capitalize on market opportunities makes sense given its strong same-store sales performance
2. Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
3. Free cash flow margin expanded by 2.7 percentage points over the last year, providing additional flexibility for investments and share buybacks/dividends

At $163.20 per share, Texas Roadhouse trades at 23.1x forward price-to-earnings. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

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 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.