Magic Formula
ProCheap × high return on capitalJoel Greenblatt's Magic Formula ranks the market by combining cheapness (earnings yield = EBIT/EV) with quality (return on capital). Lower combined rank = a cheaper, higher-returning business. Not investment advice.
How it works
Two numbers, ranked independently across the whole universe. Earnings yield asks what you get back for what you pay. Return on capital asks whether the business is any good at turning money into more money. A company cheap on one and terrible on the other lands mid-pack. Only names decent at both climb.
Final rank is the two ranks added together, lowest first. Ties go to the cheaper name.
When it misleads
It skips banks and insurers, where enterprise value means something different. It reads trailing earnings, so a company mid-collapse still looks cheap right up until the print.
Joel Greenblatt built it as a basket, not a shortlist. His own advice was to hold all of it rather than pick from it, and picking is exactly what a ranked list invites you to do.
| # | Ticker | Earn Yield | ROC | %200w |
|---|---|---|---|---|
| 101 | UBER | 3.9% | 133.2% | +15.1% |
| 102 | NWSA | 6.7% | 29.5% | +22.9% |
| 103 | CL | 4.3% | 94.6% | +3.7% |
| 104 | AMGN | 4.2% | 102.2% | +47.1% |
| 105 | EXR | 3.8% | 163.9% | −5.4% |
| 106 | TTD | 9.0% | 21.6% | −78.2% |
| 107 | IBKR | 5.9% | 34.3% | +111.4% |
| 108 | TDG | 4.6% | 65.5% | +1.1% |
| 109 | WSM | 5.2% | 45.3% | +59.9% |
| 110 | KO | 4.3% | 91.1% | +31.3% |
| 111 | VZ | 7.9% | 23.0% | +22.0% |
| 112 | TEL | 5.0% | 45.8% | +28.4% |
| 113 | APP | 3.8% | 128.2% | +36.1% |
| 114 | PHM | 12.1% | 17.8% | +19.7% |
| 115 | BF-B | 6.8% | 25.5% | −39.9% |
| 116 | MMM | 5.5% | 37.1% | +36.8% |
| 117 | BSX | 4.7% | 50.5% | −33.9% |
| 118 | HUBB | 4.5% | 61.4% | +20.3% |
| 119 | MSI | 3.7% | 161.2% | +24.3% |
| 120 | BBY | 6.8% | 25.5% | +16.9% |
| 121 | MTD | 3.8% | 110.6% | +3.2% |
| 122 | MDLZ | 3.7% | 145.4% | −7.2% |
| 123 | NWS | 6.0% | 29.5% | +26.2% |
| 124 | LHX | 4.4% | 62.7% | +7.1% |
| 125 | PH | 3.8% | 107.5% | +57.2% |
| 126 | REGN | 6.2% | 28.1% | +6.3% |
| 127 | TT | 3.9% | 102.0% | +35.8% |
| 128 | PSA | 3.2% | 5026.0% | +2.5% |
| 129 | SHW | 4.1% | 72.9% | +6.6% |
| 130 | GD | 5.3% | 36.8% | +26.0% |
| 131 | CLSK | 10.3% | 16.7% | +26.3% |
| 132 | JD | 361.4% | 14.3% | −16.6% |
| 133 | CHRW | 4.3% | 58.4% | +30.7% |
| 134 | MCO | 3.8% | 106.3% | +17.7% |
| 135 | TXT | 8.2% | 18.5% | −2.3% |
| 136 | VICI | 8.1% | 18.7% | −16.8% |
| 137 | XYZ | 6.4% | 23.4% | +20.9% |
| 138 | SYY | 5.8% | 29.1% | +5.0% |
| 139 | ALGN | 5.7% | 30.2% | −30.4% |
| 140 | META | 5.4% | 33.0% | +25.9% |
| 141 | LVS | 7.3% | 19.5% | −12.1% |
| 142 | ORLY | 4.4% | 52.5% | +12.7% |
| 143 | SLB | 5.2% | 35.0% | +23.3% |
| 144 | PEP | 5.0% | 39.4% | −14.7% |
| 145 | EMR | 3.4% | 144.8% | +33.3% |
| 146 | UPS | 7.5% | 18.0% | −23.3% |
| 147 | NXPI | 4.7% | 44.5% | +4.2% |
| 148 | PLD | 2.8% | 731.5% | +12.8% |
| 149 | FSLR | 8.2% | 16.8% | +5.0% |
| 150 | ZBRA | 3.4% | 144.3% | +25.2% |