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Stock Strategist

Consistent Corporate Track Records Few and Far Between

How many companies can grow 20% a year for a decade?

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Typically when we run stock screens, we present the rationale behind the screen along with the results. For example, why it makes sense to look for companies with high returns on capital, and which companies have demonstrated that ability. This time, though, we'd like to focus not on the outputs of the black box, but crack open the lid of the black box and peek inside.

Here's what I mean. Most everyone knows that it's rare for a company to achieve high returns on capital for many consecutive years. But how rare is it? How many companies are able to do it for two years running? Three years? Ten years? And a related question: If a company posts a high return on capital in a given year, how long might we expect that performance to continue? These are the kinds of questions we'll examine below.

Haywood Kelly, CFA has a position in the following securities mentioned above: APOL. Find out about Morningstar’s editorial policies.