These 3 Stocks Could Help You Compound Wealth for Years to Come

Key Points

• These companies have enough profitability to keep delivering double-digit upside potential to investors in the coming years, especially at these prices.
• Financial strength trickles into short sellers leaving and price action running hot.
• Wall Street analysts join in through boosts in both ratings and valuations.

There are typically two participants in the stock market, those who enter and end each day on a flat note for their portfolios (meaning no positions) and rely on short-term intraday trading strategies to grow their capital, and then those who are out there hunting for the sort of businesses that will allow for a less volatile path forward for wealth creation. Those who focus on the long-term usually care about two things in their search for their next investment.

First of all, the company they choose to buy stock from must have an above-average level of profitability. Of course, profit only comes (and stays) when a business has achieved a strong enough position in its industry and offers, as far as products and services are concerned. Then every once in a while, these profitable companies will offer a new chance to buy in through attractive valuations.

Attractive valuations don’t necessarily mean low prices in terms of their current position on the chart, but rather low relative to their potential future value based on their profitability. Some of the most attractive compounders available today for investors are names like Altria Group Inc. NYSE: MO, Mastercard Inc. NYSE: MA, and Ulta Beauty Inc. NASDAQ: ULTA, which are worth considering for the future of wealth creation.

Markets Agree, Altria Stock Is Cheap

Even after a 20% rally over the past 12 months, a rare achievement for a company not known for volatility or big moves, there are some signs that suggest Altria stock is still undervalued relative to where it should be trading in the future.

One way investors can gauge this is by examining the company's dividend payments.

Through a payout of $4.08 per share, Altria offers investors an annualized dividend yield of up to 6.9%, which exceeds both U.S. inflation rates and Treasury bond yields. Considering that the company’s yield has historically been closer to 4%, today’s elevated yield could be a sign that the stock is likely to return to higher prices shortly.

Driving the momentum behind that gap higher is the financial profile itself.

Altria generates up to 42.8% in returns on invested capital (ROIC), which is one of the main drivers behind annual stock price performance, allowing investors to potentially compound their capital in Altria stock at that rate over a long enough timeframe, not to mention collecting a nice dividend along the way as well.

Knowing that this setup significantly favors Altria buyers today, short sellers have recently left the scene, as investors have noticed a decline of up to 8.1% in the company’s short interest over the past month alone, indicating a clear sign of bearish capitulation.

Analysts Like Mastercard Stock

Investors can bet on one certainty for the future: consumers will keep spending on discretionary items and necessities alike.

At the center of this certainty are companies like Mastercard, which collect a piece of the spending pie every time a transaction is made, providing its shareholders a stress-free way to compound their returns.

In fact, this business model and incredible market penetration worldwide allow Mastercard to generate as much as 56.6% in ROIC. This factor can be seen in the stock chart in terms of how rare drawdowns are for Mastercard.

Any and all volatile periods are quickly bought in this company, as this certainty often results in a higher price being achieved almost immediately.

These features also make Mastercard a highly attractive stock for analysts to cover and build their reputations, which may be why Timothy Chiodo from the UBS Group decided to reiterate his Buy rating on Mastercard and set a valuation target of up to $670 per share.

Compared to today’s prices, Chiodo’s call implies that Mastercard can rally by as much as 21%, and there is a good chance the stock has a lot more steam left in it.

Ulta’s Business: The Ultimate Hedge

Most investors would see the skincare and makeup industry as part of the consumer discretionary sector, when in reality it is closer to being a staple of consumption.

Ulta’s consumer base will likely keep their budgets for these products, regardless of whether the economy is booming or struggling.

That’s why the business can keep up with these other names, achieving a 26.8% ROIC despite operating in a completely different space and size bracket. That high return profile, and a 32% rally over the past quarter alone, drove Ulta’s short interest down so much last month that there are virtually no short sellers left willing to bet against this company.

Following the bears' decision to give up the fight, Wall Street analysts are now boosting their price targets on Ulta as well. Michael Baker from DA Davidson was one of the first to express some bullish outlooks for Ulta as of early July 2025, with a Buy rating and a valuation target of up to $550 per share.

Even though the stock now trades at a new 52-week high, this analyst believes investors are in for an additional return of as much as 11%, and, like all names on this list, a high ROIC rate will likely push valuations significantly higher than that.