This screen looks for durable, highly profitable businesses: 12%+ return on invested capital and return on equity sustained over five years, strong margins, and earnings backed by real cash flow.

It pairs those returns with conservative balance sheets, so the profitability reflects a genuine competitive advantage rather than financial leverage dressed up as skill.

Quality investing focuses on how good a business is, not just how cheap the stock is. High returns on capital sustained over years are the fingerprint of a durable competitive advantage: a company that can reinvest profits at attractive rates and compound value for owners.

The bet is that wonderful businesses are worth holding for a long time, letting compounding do the work. The main risk is overpaying, since even a great company is a poor investment at the wrong price.

Because quality rarely trades cheap, valuation is the deciding factor. Run a fair-value estimate on the names that interest you to see what you would be paying for that quality.

If a quality name looks expensive, the growth-at-a-reasonable-price screen is a natural next stop, since it applies a valuation ceiling to a similar quality bar.