Magic Formula Screener
Stocks ranked by Greenblatt's Magic Formula — combining earnings yield and return on capital
The Magic Formula ranks companies by two metrics: how cheap they are (earnings yield) and how good the business is (return on capital). Lower combined rank = better value + quality.
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12,455
Ranked Companies
11.8%
Avg Earnings Yield
13.6%
Avg Return on Capital
| # | Name |
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About the Magic Formula
The Magic Formula was developed by Joel Greenblatt in his book "The Little Book That Beats the Market." It systematically identifies companies that are both cheap and high-quality by ranking on two metrics:
Earnings Yield
Operating Income / Enterprise Value — Measures how cheap a stock is relative to its earnings. Higher earnings yield = cheaper stock. Uses operating income (not net income) to normalize across tax and debt structures.
Return on Capital
Operating Income / Capital Employed — Measures how efficiently a business uses its capital. Higher ROC = better business. Capital employed = total assets minus current liabilities.
How Ranking Works
Each company is ranked separately on earnings yield (highest = rank 1) and return on capital (highest = rank 1). The two ranks are then added together. The lowest combined rank represents the best combination of value and quality.
Exclusions
Per Greenblatt's methodology, financial companies (banks, insurance) and utilities are excluded because their regulated capital structures make return on capital comparisons misleading. Companies with negative operating income or negative enterprise value are also excluded.
Note: The Magic Formula is designed as a long-term strategy. Greenblatt recommends holding a diversified portfolio of top-ranked stocks for at least one year. This screener provides the data — portfolio construction and timing are up to the investor.