Truly great businesses with sustainable competitive advantages are exceptional, and these companies are usually very expensive.
Just as we see degrees of uncertainty, we see degrees of competitive strenghts. Some businesses may not have any competitive strenght at all, and may be valued at book value or less, and other businesses may have some competitive strenght and may deserve to be valued accordingly.
Our valuation models try to reflect the competitive strenght, (also potential growth and risks) and therefore considers the situations when a company may generate above or below average returns on invested capital.
As for compounders, and for any valuation, among other things, we look for relatively undervalued companies: companies selling at prices relatively cheap compared to other companies of the same general quality, growth potential and risks.