Finding a high-quality company is not just about finding a stock with a rising share price. A strong business should have solid finances, reliable growth, healthy cash flow, a strong competitive position, and good management. It should also have a balance sheet that can handle difficult periods.
In September 2026, this approach has become even more important. Corporate earnings remain strong, but investors now need to look beyond headline profit numbers. Artificial intelligence, large capital spending plans, high valuations, interest rates and economic uncertainty can all affect how a company performs.
A simple quality check can help investors separate durable businesses from companies that only look attractive for a short period.
1. Check Return on Invested Capital
Return on invested capital, or ROIC, is one of the best measures of business quality. It shows how well a company uses the money placed into the business to produce returns.
A company with a high ROIC can create strong returns without the need for huge amounts of additional capital. As a basic starting point, investors can look for companies with ROIC above 15%.
However, one strong year is not enough. A better company has a high ROIC across several years. It is also useful to compare the result with competitors because some industries naturally have higher returns than others.
A September 2026 FinanceCharts screen showed very high ROIC among companies such as NVIDIA, Apple, Microsoft and TSMC. These companies operate in different areas, so their numbers need proper industry context before any final decision.
2. Look at the Quality of Revenue Growth
Fast revenue growth can look exciting, but not all growth has the same value. A company may show strong sales because of one large contract, an acquisition or a temporary rise in demand.
High-quality companies usually show a more durable pattern. Their sales can rise across several years, their customer base stays healthy, and demand comes from more than one source.
Investors should also ask whether growth comes from the core business or from acquisitions. Organic growth is often more useful when judging the strength of the underlying company.
This question has special value in 2026 because artificial intelligence has become a major source of corporate growth and investment. A useful test is simple: would the company still have a strong growth story if today’s hottest technology theme became less important?
3. Study Profit Margins
Profit margins can tell investors a lot about a company’s business model. Gross margin shows how much money remains after the direct cost of products or services. Operating margin gives a broader view of the company’s ability to turn sales into operating profit.
A company with strong and stable margins often has advantages such as pricing power, scale, a trusted brand or a product that competitors cannot easily copy.
Margin direction also matters. A company with a 20% operating margin that moves toward 25% may have stronger economics than a company with a 30% margin that keeps falling.
Recent earnings data has made this measure even more important. S&P 500 net profit margins reached about 15%, an all-time high. That means investors need to ask whether current margins can stay high or whether they may fall once business conditions change.
4. Focus on Free Cash Flow
Profit is important, but cash is harder to fake. Free cash flow shows how much money remains after a company pays for the capital needed to run and expand its business.
Investors should compare free cash flow with net income. If a company reports $1 billion in profit but produces very little cash, there may be a reason to investigate further.
Free cash flow margin is another useful measure. It divides free cash flow by revenue and shows how much of each sales dollar becomes available as cash.
This point matters a lot in 2026 because of the huge investment tied to artificial intelligence. Some companies may report strong earnings while also face very large capital spending needs. LSEG research has highlighted cases where reported earnings received help from non-cash gains while large AI-related capital expenditure placed pressure on free cash flow.
5. Examine the Balance Sheet
A strong business should have enough financial strength to survive difficult periods. This is why debt deserves close attention.
Investors can study debt-to-equity, net debt-to-EBITDA and interest coverage. They should also check cash reserves, debt maturity dates and the type of debt a company carries.
A September 2026 quality screen from Forbes used debt-to-equity of 1 or less as one of its conditions. This does not mean every good company must meet that exact level. Different industries can support different amounts of debt.
The bigger question is whether the company can handle weaker sales, higher interest costs or a period of poor results without serious financial stress.
6. Look for Real Pricing Power
Pricing power is one of the clearest signs of a strong business. If a company can raise prices without losing many customers, it may have a strong position in its market.
Pricing power can come from a trusted brand, high switching costs, limited competition or products that customers cannot easily replace.
Margins can provide useful evidence here. If prices rise while demand stays fairly stable and margins remain healthy, the company may have strong pricing power.
The recent comparison between Linde and Air Liquide gives a useful example. Linde had an operating margin of about 30%, compared with roughly 21% for Air Liquide. The difference shows how business efficiency can create a major advantage between companies that operate in similar industries.
7. Check the Quality of Earnings
A company can report strong earnings without having equally strong underlying business performance. Investors should therefore look at what caused the change in profit.
One-time gains, tax benefits, asset sales, changes in asset values and accounting effects can all influence reported earnings.
Share buybacks can also increase earnings per share even when total profit grows more slowly. Stock-based compensation deserves attention as well because it can create a difference between reported profit and the economic cost to shareholders.
This check matters even more when overall market earnings are very strong. With 97% of S&P 500 companies reported, earnings were pacing about 52% above the prior year, according to FactSet data cited by Barron’s. Strong headline growth makes it even more important to understand what sits behind the number.
8. Study Management and Capital Allocation
Good management does more than produce sales growth. It decides where company cash should go.
Management can reinvest money into the core business, reduce debt, buy other companies, return money to shareholders or hold cash for future opportunities. The quality of these decisions can have a major effect on long-term returns.
Apple offers an interesting example. Despite its huge size, its fixed assets were about $51 billion at its latest reporting point, while its business continued to produce substantial cash. Its relatively asset-light model gives it considerable financial flexibility.
Investors should study the history of management decisions rather than rely only on promises made during earnings calls.
9. Find the Economic Moat
A strong company usually has something that protects it from competitors. This protection is often called an economic moat.
A moat can come from a powerful brand, network effects, high switching costs, lower costs, intellectual property, scale or a difficult-to-copy distribution system.
The strongest companies may have several of these advantages at once. A business with a trusted brand, loyal customers, strong technology and a large distribution network can be much harder to challenge than a company with only one advantage.
Financial numbers tell investors what a company has achieved. A moat helps explain why those results may continue.
10. Do Not Ignore Valuation
The final step is valuation. A great company is not always a great investment at any price.
Investors should compare the share price with earnings, free cash flow, growth prospects and the strength of the business. A company with excellent economics can still produce poor returns if investors pay an extreme price for it.
A September 2026 Forbes screen used ROIC above 15%, debt-to-equity of 1 or less, at least five consecutive years of revenue growth, free cash flow margin of at least 10%, and price-to-free-cash-flow of 25 or less as part of its quality and value framework.
These numbers should not be treated as universal rules. They work better as a starting point for deeper research.
What Matters Most in September 2026
The current market makes three areas especially important. First, investors should pay close attention to cash conversion because large AI and infrastructure spending can place pressure on free cash flow.
Second, investors should study the returns a company earns on new capital. Rapid growth is less impressive if every extra dollar of revenue requires a huge amount of investment.
Third, margin durability deserves close attention. With S&P 500 net profit margins near a record 15%, the key question is whether companies can maintain those levels.
The Bottom Line
A high-quality company is not simply one with fast sales growth or rising earnings. It is a business that can produce strong returns, generate real cash, manage debt, protect its margins, retain customers and use capital wisely.
In September 2026, investors have plenty of strong earnings to study, but headline numbers alone are not enough. A careful review of ROIC, revenue growth, margins, free cash flow, debt, pricing power, earnings quality, management, competitive advantages and valuation can provide a much clearer picture.
The goal is simple: find businesses that can remain strong not only when markets are favorable, but also when conditions become difficult.
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