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Stock list · As of 11/15/2026

How to find cheap quality stocks. High return on capital, low EV/EBIT.

Nine rules following the Magic Formula principle score every stock's return on capital and EV/EBIT daily, each named with its points.

Scored worldwide16,182 stocks
Above threshold worldwide2,396 (14.8%)
Rules9, all named

Current example matches

As of 11/15/2026

All matches: “High Match” for this profile.Upper score threshold 5 (tick in the bar).

  • Rule strip:
  • met
  • not met
  • no data
  • filter
  • deduction rule

One cell per rule, ordered by filters, bonus points and deductions. max. = sum of all bonus points. Tap a metric to see the rule reference.

Sandisk Corp
SNDK · Technology
10 of max. 18 pts
Valero Energy Corporation
VLO · Energy
10 of max. 18 pts
Omnicom Group Inc
OMC · Communication Services
8 of max. 18 pts
Solventum Corp.
SOLV · Healthcare
8 of max. 18 pts
HP Inc
HPQ · Technology
8 of max. 18 pts
Micron Technology Inc
MU · Technology
8 of max. 18 pts
Cognizant Technology Solutions Corp Class A
CTSH · Technology
8 of max. 18 pts
Deckers Outdoor Corporation
DECK · Consumer Cyclical
8 of max. 18 pts
Fox Corp Class B
FOX · Communication Services
8 of max. 18 pts
Marathon Petroleum Corp
MPC · Energy
8 of max. 18 pts
These are just the 10 highest scores of this selection.

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Illustrative selection based on a rule-based two-factor profile following the Magic Formula principle, calculated daily. Financials and utilities are excluded. Not a buy recommendation, just a starting point for your own research.

View the full strategy: Magic Formula: Value + Quality →

Related strategies on the same topic: Acquirer's Multiple: EV/EBIT Deep Value, Moat Quality

How selective the rules are

Of 13,710 stocks scored worldwide, 2,396 reach the upper threshold. The list shows the ten highest scores of the selected view.

High Match2,396 · 14.8%Medium Match797 · 4.9%Low Match10,517 · 65.0%Not rated2,472 · 15.3%

How these rules would have performed in the past is shown by the backtest on the strategy page, compared with the MSCI World. Go to the strategy backtest

Excerpt from the rule profile

These exact rules run over every stock daily.

4 of 9 rules
No financials or utilities (excluded as in the original)+0 ptsExclusion
Return on capital (Greenblatt)isat least40%+5 pts
Group:AND
+3 pts
Return on capital (Greenblatt)isat least25%
Return on capital (Greenblatt)isless than40%
All of these conditions must be met
Group:AND
+1 pts
Return on capital (Greenblatt)isat least15%
Return on capital (Greenblatt)isless than25%
All of these conditions must be met
+ 5 more rules in the profile

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What makes a cheap quality stock?

This list isn't built from an opinion but from a rule-based two-factor profile following Joel Greenblatt's Magic Formula principle, running daily across the entire analysis universe, from the Germany 40 and S&P 500 to Global (Total World). On every match all rules are visible with their names and points, the full profile with every threshold after a free sign-up. It scores return on capital and EV/EBIT in fixed point tiers, and excludes financials and utilities just like the original.

Return on capital without goodwill (ROC)
A ROC of 40% or above counts as a near-monopoly return (+5), 25 to 40% as excellent (+3), 15 to 25% as solid (+1). Greenblatt's own definition divides operating profit (EBIT) by net working capital plus net fixed assets, deliberately excluding goodwill.
Low EV/EBIT as the price yardstick
Under 6.7 signals deep undervaluation, equivalent to an earnings yield above 15% (+5). 6.7 to 10 counts as very attractive (+3), 10 to 16.7 as fairly valued (+1).
Value destroyers and overpriced names get penalized
A ROC below 5% or missing altogether means value destruction and costs two points. An EV/EBIT of 33.3 or above, or a missing multiple because operating profit is negative, counts as massively overpriced or unprofitable (-2).
Financials and utilities excluded
An exclusion rule rules out both sectors upfront, just like the original: their balance-sheet logic makes the return-on-capital metric not meaningfully comparable.

The metrics behind it

  • EV/EBITEnterprise value including debt per euro of operating profit.
  • Return on capital (ROC)Operating profit relative to tangible capital employed, excluding goodwill.

Frequently asked questions

What is the Magic Formula?
A two-factor principle popularized by Joel Greenblatt: good companies (high return on capital) bought at cheap prices (low EV/EBIT) are, in Greenblatt's thesis, expected to fare better than the broad market over the long run. StockScorer translates the original ranking into fixed, traceable point tiers.
Why return on capital (ROC) instead of return on equity (ROE)?
ROE depends heavily on leverage, a large debt load can inflate it. Greenblatt's ROC instead measures operating profit against the tangible capital actually employed, excluding goodwill, capturing the earning power of the business itself.
Why are financials and utilities missing from the list?
Because return on capital can't be meaningfully calculated under their balance-sheet logic (regulated capital, a different balance-sheet structure). The profile excludes both sectors by an exclusion rule, exactly as the original does.
What does EV/EBIT mean?
Enterprise value (market cap plus net debt) relative to operating profit. Unlike the P/E ratio, it factors in debt and is therefore harder to flatter through balance-sheet leverage.
Why isn't there a P/E ratio here?
The profile prices a business relative to its operating result (EV/EBIT), not relative to net profit after interest and tax (P/E). That makes companies with different capital structures easier to compare.
What happens to value destroyers?
A ROC below 5% or missing altogether costs two points, as does an EV/EBIT of 33.3 or above or a missing multiple for unprofitable companies. These deductions keep weak combinations from reaching the upper score threshold.
How often is the list updated?
Daily. The rule profile runs every day across the entire analysis universe, then the match list is recalculated.
Is this investment advice?
No. StockScorer only provides automated, rule-based classifications for information purposes, not a recommendation to buy, hold or sell any security.

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The content on this page is for general informational purposes only. It does not constitute individual investment advice, a recommendation to buy or sell securities, or a public offer. Past performance is not a reliable indicator of future results. All information without guarantee.

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