Built to Last - Finding True Compounders

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Built to Last - Finding True Compounders

EUROPE | Europe Insights EquityJuneResearch19, 2026

We introduce the quant-driven Jefferies' Compounder framework,

which highlights a systematic approach to identifying companies with

structurally attractive characteristics. Our framework identifies 20+ "core

compounders" and 90+ which have the potential to become "core"

over time. Our sector teams also highlight five high conviction future

compounders.

Why now? With global equities at all-time highs, increasingly driven by the multi-year global AI

capex cycle, our conversations with investors have focused on names that can trade through .

an ever-more complex and volatile macro environment. Whilst ST term market leadership

can be driven by sector rotation, macro shifts, or factor dynamics, we believe businesses

with consistent earnings delivery, robust margins, and strong cash generation have the tools

to outperform over the long-term. Indeed, our backtest results suggest that compounders

with positive earnings revisions and strong FCF generation have delivered consistent superior

returns post-COVID. We think the quality and durability of earnings matter more than ever.

Jefferies Compounder Framework - Our framework is built around three core pillars:

1. Proven Compounding - ST and LT EPS and FCF per share growth;

2. Economic Resilience - high, consistent, and rising operating margins;

3. Self-funded Growth - strong cash conversion, low reinvestment intensity, and a track

record of balance sheet discipline.

Beyond our core pillars, we consider three additional pillars:

1. Topline Leadership - stable, positive, and consistent topline growth;

2. Capital Discipline - high and improving returns on capital;

3. Valuation Support - below peak cycle PE, solid FCF yield, and low PEG.