For Quality compounders
Buffett's checklist, applied to every stock daily.
Wide moat, durable ROIC > 15%, low debt, founder-friendly governance. We score the full universe on quality dimensions and surface the 50 stocks that consistently meet Buffett-grade criteria - refreshed daily.
· Reviewed by Javier Sanz, ValueMarkers Founder
The pain we solve for quality compounders
"Wide moat" is a vibe until you make it numerical. We do that - ROIC stability over 10 years, capital-allocation history, insider-ownership signal - and rank.
Must-haves we built in
- ROIC > 15% for 7+ consecutive years
- Debt/EBITDA < 2.5x
- Buyback yield > 0% (returning capital)
- Founder still on board OR insider ownership > 5%
- Beneish + Altman both clean
VM features tailored to you
- Quality compounder leaderboard (top 50)
- ROIC Stability Score (proprietary)
- Insider-ownership tracker
- Capital allocation report card per stock
How we filter quality compounder candidates
Quality compounding is the Buffett-Munger style of fundamental investing: own a small number of businesses with durable economic moats and high returns on capital, hold them for very long periods, and let the underlying business compound. ValueMarkers makes this style numerical with five interlocking quality gates. First, ROIC above 15% for 7 of the last 10 years - this filters for durability, not just one-year strength. Second, debt-to-EBITDA below 2.5x - quality compounders carry conservative balance sheets. Third, positive net buyback yield over the trailing 5 years - management is returning capital, not diluting shareholders. Fourth, insider ownership above 5% or founder still active - skin in the game correlates with long-term capital allocation discipline. Fifth, both Altman Z-Score above 2.99 (safe zone) and Beneish M-Score below -1.78 (no manipulation flag) - the business is not at distress risk and is not aggressive in accounting. Names passing all five comprise our Quality Compounder leaderboard, refreshed daily, typically 40-70 names.
Building the screen step by step
Start with the ROIC durability filter: ROIC > 15% in at least 7 of the last 10 fiscal years. Layer net buyback yield > 0% (cumulative over 5 years) to filter for shareholder-friendly capital allocation. Layer debt-to-EBITDA < 2.5x to filter for balance-sheet conservatism. Layer founder-on-board OR insider ownership > 5%. Layer Altman > 2.99 AND Beneish < -1.78. The resulting universe typically holds 40-70 names spanning consumer staples, industrials, software, and selected financials. Concentrate the basket aggressively - quality compounding works at 10-20 positions, not 50. Hold positions for at least 5 years; turnover should approach zero unless the underlying quality metrics deteriorate materially.
Common mistakes quality compounders make
Quality compounder investors typically err in three directions. (1) Overpaying - even the best business is a bad investment at 40x earnings if growth slows by 5%. The screen identifies quality; valuation discipline must be added separately. (2) Holding too long after the moat erodes - GE was a quality compounder for decades before it stopped being one in 2009-2017; ROIC trajectory matters more than the absolute level. (3) Confusing quality with size - the largest companies are not always the highest-quality compounders. Some of the best decade-long compounders (Constellation Software, Old Dominion Freight, Heico) were mid-caps when the compounding began.
Case study: CTAS
Cintas (CTAS) has been on the Quality Compounder leaderboard continuously since 2018 - ROIC consistently above 20%, debt-to-EBITDA below 1.5x, net buyback yield positive every year, founder family still substantially involved. The stock has roughly tripled over that period while the underlying earnings have roughly doubled - the multiple expansion reflects the market recognizing the durability over time.
Case studies illustrate how the ValueMarkers screen flagged this name historically; they are research examples, not investment recommendations. See our full disclaimer.