3 Top Ranked Compounder Stocks to Buy Now and Never Sell
Some investors like active trading in stocks, while others like to invest for income through dividends. However, one way to grow your portfolio at an incredible rate over the long term is to buy Compounder Stocks.
A compounder stock is a company with high return on invested capital, a robust franchise, recurring revenues, intangible assets, pricing power, and low capital intensity. These are companies that have exhibited exceptional long-term returns, and regularly outperform during economic downturns. They remain resilient during tough economic times because their products are necessities, with wide margins, and very regular purchases or usage.
These stocks outperform the market on almost every time frames, and when you zoom out you can see just how substantial these businesses are.
Copart CPRT, Brown and Brown BRO, and SherwinWilliams SHW are all perfect examples of compounder stocks and have dramatically outperformed the market over the last 25 years. Furthermore, they all currently boast top Zacks Ranks, further improving the odds of buying them on a short-term upswing.
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Copart
Copart is a leading online vehicle auction and remarketing company based in the United States. Founded in 1982, the company provides a platform for buying and selling a wide range of vehicles, including cars, trucks, motorcycles, and even industrial equipment, through its online auction marketplace.
Copart's innovative approach has transformed the traditional salvage and used vehicle market by leveraging technology to connect buyers and sellers across the globe. With a vast network of facilities and a strong online presence, Copart has become a key player in the automotive industry's shift towards digitalization and online transactions.
Copart stock has compounded at an unbelievable 23.8% annually over the last 25 years, returning more than 22,000% over that time. Returns like that can be attributed to a steady annual increase in sales and earnings, as well as share buyback programs executed over the long run. CPRT EPS have grown from $0.11 in 2003 to $2.42 per share today, a CAGR of 16.7%.
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Copart enjoys a Zacks Rank #2 (Buy) rating, reflecting upward trending earnings revisions. Current quarter earnings estimates have been revised higher by 3.3% and FY23 earnings have been increased by 1.6% over the last two months. Additionally, the Auction and Valuations Services industry sits in the top 2% of the Zacks Industry Rank.
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Brown and Brown
Brown & Brown is a leading insurance brokerage firm headquartered in the United States. Established in 1939, the company offers a wide range of insurance and reinsurance products and services to businesses, individuals, and organizations.
With a focus on providing customized insurance solutions, Brown & Brown operates through a decentralized structure, allowing its local offices to tailor services to the specific needs of their clients. The company's growth strategy includes both organic expansion and strategic acquisitions, making it a prominent player in the insurance industry.
Brown and Brown has compounded at an annual rate of 15.7% annually over the last 25 years, returning a total of nearly 4,000% over that time and living up to the compounder stock definition.
BRO has a Zacks Rank #1 (Strong Buy) rating, indicating upward trending earnings revisions, as can be seen in the chart below. Current quarter earnings estimates have been revised higher by 8.6% over the last two months and are forecast to grow 26% YoY to $0.63 per share. FY23 earnings estimates have been upgraded by 6.75% and are expected to climb 18% YoY to $2.69 per share.
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Brown and Brown is trading at a one year forward earnings multiple of 26.7x, which is above the industry average of 21.7x, and in line with its five-year median. Additionally, the company offers a dividend yield of 0.6% and has raised it by an average of 9.2% annually over the last five years.
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SherwinWilliams
Sherwin Williams is a well-established global leader in the paint and coatings industry. With a history dating back to 1866, the company is known for its high-quality paints, coatings, and related products. SherwinWilliams serves a wide range of customers, including professional contractors, homeowners, industrial manufacturers, and commercial businesses.
The company's extensive product portfolio and commitment to innovation have contributed to its strong market presence. SherwinWilliams operates through a network of retail stores, distribution centers, and manufacturing facilities, providing customers with easy access to its products and services.
SHW has compounded at an annual rate of 16.8% over the last 25 years, returning nearly 5,000% over that period. The Paints and Related Products industry sits in the 2% of the Zacks Industry Rank, and the stock also has a Zacks Rank #1 (Strong Buy) rating.
Next quarter earnings estimates have been revised higher by 22.1% and FY23 earnings estimates have been boosted by 12.4%. SherwinWilliams is forecast to grow EPS by 12.2% annually over the next 3-5 years.
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SHW is trading at a one year forward earnings multiple of 27.7x, which is above the market average, and in line with its five-year median. The company also offers a dividend yield of 0.9% and has raised the payment by 17.1% annually over the last five years.
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Bottom Line
Although these may not be the flashiest companies in the market, their performance speaks for themselves. These companies have been growing sales and earnings for decades and are likely to do so for decades in the future.
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The Sherwin-Williams Company (SHW) : Free Stock Analysis Report
Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
Copart, Inc. (CPRT) : Free Stock Analysis Report
