Quality & Compounders
Quality Monopoly (OPM + ROCE) is a Quality & Compounders screen. It checks every NSE-listed stock against 2 conditions computed from nightly data, after excluding heavily pledged promoters and very small market caps. This page explains the rule, each figure and its source. It lists no stocks and is not advice.
Peter Lynch and Warren Buffett both noted that you cannot identify a monopoly by reading about it — you identify it by the numbers it produces. A true economic monopoly or near-monopoly has two financial fingerprints that appear together and almost nowhere else: it earns very high operating margins because customers have no credible alternative, and it earns very high returns on capital because competitors cannot replicate the moat by simply spending more. Either metric alone can be mimicked: a lightly-capitalised niche business might show high ROCE temporarily; a heavy-spend incumbent might show high margins through pricing without earning a good return on its bloated balance sheet. The combination — sustained EBIT margin above 30% AND ROCE above 25% — is the screen that neither a mediocre business nor a capital-inefficient one can pass. In the Indian context, businesses that clear this bar tend to be dominant infrastructure players, platform businesses with strong network effects, or branded consumer staples with multi-decade distribution moats. The sustained qualifier (3-year average for margin) ensures a cyclically elevated year does not trigger a false positive.
A stock must satisfy every condition below. Conditions are grouped under the pillar they test.
Pricing Power
Capital Return
Hard excludes
Ranked by ROCE, highest first.
EBIT Margin — 3-Year Average (%)
Simple average of annual EBIT margin (EBIT/revenue × 100) across the three most recent completed fiscal years. EBIT = profitBeforeTax + financeCosts from FinEdge annual income statements.
High is better
EBIT Margin — Latest Year (%)
EBIT for the most recent completed fiscal year divided by total revenue for the same year, expressed as a percentage.
High is better
Return on Capital Employed (%)
EBIT divided by capital employed (total assets minus current liabilities), expressed as a percentage, using the most recent annual balance sheet and income statement figures.
The capital-efficiency gate. Must exceed 25%. When a business with EBIT margin above 30% also earns ROCE above 25%, it is almost certainly a structural moat rather than a cyclical or accounting artefact. The ROCE threshold at 25% is deliberately set lower than the margin threshold to accommodate businesses with significant intangible assets or working capital, which can reduce the denominator without corresponding moat weakness.
High is better
Type hypothetical values to see which conditions they satisfy. These are not real stocks and nothing here is stored.
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How many stocks pass if this threshold were set differently. Counts only; no stocks are named.
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We have not measured this screen yet, so there is no record to explain.
Not yet testable — 5 of 6 points needed to chart a rolling information coefficient.
This is a historical, statistical measurement produced by FINOME TECHNOLOGIES PVT LTD's research harness on past data. It is not a prediction, and past results do not indicate future results. The universe is today's Nifty 500 constituents, so the sample is affected by survivorship bias. It describes how a screen's selections behaved in the past and does not constitute investment advice or a recommendation.
Rule version 1.0.0