QGLP Formula Explained: Can It Help Spot D-Street's Next Compounders? Here's A Five-Point Guide

Finding India’s next set of long-term wealth creators has never been easy. For every stock that compounds quietly over decades, dozens promise high growth but eventually disappoint. Motilal Oswal’s latest Wealth Creation Study argues that the difference often comes down to discipline — and it distills that discipline into a four-letter framework: QGLP, short for Quality, Growth, Longevity, and reasonable Price.

At its core, QGLP borrows from Warren Buffett’s philosophy: buy businesses that are easy to understand, run by capable managers, with strong economics, and available at sensible valuations. Motilal Oswal adds one crucial missing link — explicit earnings growth — arguing that over long periods, stock returns ultimately converge with profit growth.

The report’s starting point is empirical. Looking back at India’s previous long growth phase, Motilal Oswal finds that even as the economy expanded sharply, very few stocks delivered consistent, market-beating returns over extended periods. Many failed not because they lacked growth, but because the growth didn’t last — or because investors overpaid for it.

Quality, the brokerage firm explains, is looking beyond headline numbers. It focuses on whether a business has durable competitive advantages, pricing power, and management teams that allocate capital rationally. In practical terms, the framework favours companies that consistently earn returns above their cost of equity.

This emphasis on quality is designed to avoid 'quality traps' — companies that look safe and stable but lack the ability to grow meaningfully over time.

Growth, not the speculative, is the second filter. The framework sets a high bar, preferring companies that have demonstrated strong and consistent earnings growth rather than one-off spikes.

The report argues that as India transitions into a multi-trillion-dollar economy, benchmark returns could move higher. As a result, the minimum growth threshold for identifying compounders also needs to rise.

The underlying assumption is simple: over long investment horizons, valuation re-rating plays a smaller role, and earnings growth does the heavy lifting. That’s why the model leans on recent profit growth as a proxy for future potential.

What truly differentiates QGLP is its focus on Longevity. The study argues that the length of time a company can sustain high growth matters as much as the growth rate itself.

Extending a strong earnings runway by even a few years can dramatically increase intrinsic value, allowing investors to justify higher valuation multiples without sacrificing returns.

Motilal Oswal says that Price usually acts as a reality check. Even the best business can turn into a poor investment if bought too expensively. QGLP uses valuation metrics that link price to growth, ensuring investors don’t overpay for optimism. The idea is to look for value-price gaps — situations where quality and growth are not fully reflected in the stock price.

Historically, the study finds that companies combining strong fundamentals with reasonable growth-adjusted valuations have delivered superior wealth creation.

The authors stress that this is a methodology exercise, not a stock recommendation list.

The framework doesn’t claim to predict the next multi-bagger. Instead, it aims to systematically avoid the most common investing mistakes — chasing hype, ignoring valuation, or underestimating how hard sustained growth really is.

Motilal Oswal’s own data shows that only a small fraction, around 4%, of listed companies ever become long-term compounders. QGLP is about narrowing the search to those rare businesses that have both the numbers and the narrative to compound steadily over India’s next phase of economic expansion.