Investing in high-quality stocks can be a great strategy to maximize returns over the long term, and many of the most profitable stocks in the market over the past several years are in fact high-quality businesses. However, finding high-quality stocks is much easier said than done, and quality can be defined in multiple ways.
But we can also measure business quality in a mathematical way, and profitability is one of the most important indicators of underlying quality.
Success attracts competition in the business world, and this tends to erode profitability. When a company can sustain