Quality compounders screen

A quality compounder earns a high return on the capital it invests, grows steadily, turns its profit into cash and does not lean on debt — the kind of business that can reinvest and compound for years. The idea runs through the writing of Warren Buffett and Charlie Munger and through quality investing generally; there is no single canonical formula, so this screen is one reasonable version of it.

It asks for a return on invested capital above 15%, both over the last twelve months and in the last fiscal year; revenue that grew in each of the last five years, by more than 7% a year on average; a free cash flow margin above 10%; net debt below twice EBITDA; and a market value above $2 billion. It says nothing about price, so many of these companies trade at high multiples. The companies are ordered by return on invested capital, highest first.