High Quality US Compounders — ROCE Above 20%, Revenue Growth Above 10% on NYSE & NASDAQ

About This Screen

High-quality compounders are the rarest and most valuable category of business in any equity market. These are companies that, year after year, deploy capital at returns far above their cost of capital, grow their revenue base consistently, and do so without the crutch of financial leverage. This trifecta — high ROCE, consistent revenue growth, and low debt — is the fundamental fingerprint of a business with durable competitive advantages. Whether that advantage comes from a dominant brand, proprietary technology, regulatory protection, or deeply embedded switching costs, the financial outcome is always the same: returns on capital that far exceed the market average, sustained over long periods.

The screen requires all three conditions simultaneously. Return on Capital Employed (ROCE) must exceed 20%, a threshold that places companies well above the average publicly traded US company and signals genuine capital efficiency rather than industry-average performance. Revenue growth must exceed 10% on a year-over-year basis, ensuring the business is expanding its market position and not simply wringing higher returns from a stagnant asset base. The debt-to-equity ratio must remain below 0.25, keeping leverage conservative and ensuring that the high ROCE is not manufactured by borrowing at 5% to invest at 20% — a strategy that works until it does not.

Companies that sustain ROCE above 20% for extended periods are statistically rare. Academic studies consistently show that high ROCE businesses tend to mean-revert as competitors enter attractive markets and margins compress. Companies that defy this mean reversion for five, ten, or twenty years do so because of structural competitive advantages that prevent imitation. Identifying these companies early — before the market has fully priced in their durability — is one of the highest-value activities in fundamental investing, and this screen is designed to narrow the field significantly.

When evaluating names from this screen, consider the sustainability of both the ROCE and the revenue growth rate. A ROCE that is high because of a cyclical tailwind (e.g., commodity prices at peak, or post-pandemic demand surge) will not persist. True quality compounders show consistent ROCE through different economic cycles, not just in boom years. Pair this screen with a review of the five-year ROCE trend, the operating cash flow conversion ratio, and the reinvestment rate to identify companies that can sustain their compounding trajectory for the next decade. Data refreshes every trading day.