What would an acquirer pay for the operating business? A single multiple decides: the cheaper, the more points. Automated across the entire market.
Save the strategy and StockScorer checks its rules for you every day. You'll get a heads-up whenever a stock crosses the upper or lower score threshold.
Gap to MSCI World: -73.7 percentage points total, -2.7 per year
Index, start = 100
Past performance is not a reliable indicator of future results.
Based on all 16,182 stocks with a score. Not rated are stocks that the profile does not classify because of a size limit or an exclusion rule.
| Score | Number of stocks | High match | Medium match | Low match | Not rated |
|---|---|---|---|---|---|
| -2 | 13,952 | 0 | 0 | 11,127 | 2,825 |
| -1 | 0 | 0 | 0 | 0 | 0 |
| 0 | 842 | 0 | 0 | 807 | 35 |
| +1 | 852 | 0 | 830 | 0 | 22 |
| +2 | 0 | 0 | 0 | 0 | 0 |
| +3 | 536 | 514 | 0 | 0 | 22 |
Every stock runs through the same disclosed rules. The points add up to a score, traceable down to the individual rule.
Each rule checks a metric against a threshold, here for example “Cheapest valuation decile (EV/EBIT below 5, incl. net-cash cases)”.
In this profile, each rule that is met counts +1 to +3 or −2 points. Exclusion rules take a stock out of the rating regardless of its points: it is then not rated.
The sum is the score. That gives three classes: high, medium, low match.
These terms describe only the match with the criteria, not a recommendation to buy or sell.
EV/EBIT prices the operating result (net debt included), the way an acquirer calculates.
The cheapest valuation decile earns full points; the most expensive market half costs points.
Carlisle's thesis: every added quality factor lowers returns. So deliberately only price counts.
No. Financials and real-estate companies are excluded because enterprise value is not defined for them. This is a documented deviation from the original.
These exact rules run over every stock daily.
Index, start = 100
The backtest shows a total return of +166.4%. The MSCI World reaches +240.1% over the same period.
The same strategy with the same settings, started at every possible date. Each dot is a separate run over 5 years.
The periods overlap heavily, neighbouring runs share almost all periods. The spread therefore looks smaller than it would for independent periods. Past results say nothing about future ones.
Strategy calculated without fees and taxes, dividends reinvested.
Point-in-time composition since June 30, 2009: each period uses the members at that time. Stocks that left the market early may be missing, which favours the result.
Historical period, quarterly rebalancing. Past performance is not a reliable indicator of future results.
Purely mechanical rule application, no curated-list effect: stocks with a high match can fall just like any other stock.
Dots per card, in this order: Valuation. Filled means at least one rule in the category is met.
For committed value investors who want maximum simplicity: no quality factors, no momentum, just the price. The strategy deliberately leans into the unloved. That takes patience and the willingness to invest against prevailing sentiment.
EV/EBIT Deep Value is the radically simplified alternative to multi-layer value systems. The idea became known as the "Acquirer's Multiple" through Tobias Carlisle: high returns on capital attract competition and rarely last (mean reversion), and Carlisle's thesis holds that every added quality factor lowers returns. So only one thing counts here, with no add-on filter for cash flow, balance sheet or quality: enterprise value relative to operating earnings, i.e. EV/EBIT including all debt. Unlike the original, financials and real-estate companies are excluded: for banks, insurers and REITs enterprise value is not defined, so the multiple often turns negative and would wrongly count as cheap. Utilities are included.
The core, and the ONLY criterion in the strategy, is a single multiple: enterprise value (market capitalisation plus net debt) divided by operating earnings. An EV/EBIT up to 5 (historically the cheapest tenth of the market) earns +3 points, 5 to 8 still +1. From an EV/EBIT of 10, the score is −2 points. If the multiple is missing because EBIT is negative, that deliberately counts to the worst tier as well.
The upper threshold is a uniform 3 points across all size classes: Carlisle does split into larger and smaller universes, but applies the same rules to both, and historically smaller names even outperformed. Earlier FCF and leverage add-on rules have been removed as part of the fidelity round: Carlisle's core thesis is a single-factor model with no quality filter.
EV/EBIT 0–5: cheapest valuation decile (+3). EV/EBIT 5–8: very cheap (+1). EV/EBIT 8–10: neutral zone. From 10 or missing: expensive or unprofitable (−2).
Exclusion: financials and real-estate companies are ruled out by an exclusion rule (enterprise value is not defined for them).
No further criterion: deliberately no quality, cash-flow or balance-sheet filter, as in the original.
Why EV/EBIT instead of P/E? The P/E ratio ignores capital structure: a highly leveraged company looks optically cheap. Enterprise value prices the debt in: the perspective of someone taking over the whole business.
The original ranks the entire universe by EV/EBIT and selects the cheapest percentiles. StockScorer translates the ranks into absolute tiers (decile and quartile proxies from historical market data). A stock's score depends only on its own numbers and stays fully traceable. In extreme market phases the absolute ladder can produce more or fewer hits than a true ranking.
Fidelity update as of 23 August 2026: the earlier free-cash-flow and leverage add-on rules have been removed, because Carlisle explicitly rejects any quality filter, it would be an added factor diluting the excess return of the pure price signal. Cap thresholds are unified because Carlisle tests small- and large-cap universes with the same rules. One documented deviation remains: StockScorer uses EBIT, while Carlisle's current definition derives an adjusted top-down operating earnings figure from the income statement.
The strength is also the weakness: without a quality filter, structurally sick companies land in the cheapest decile too. The strategy bets that the price discount overcompensates for that risk. If you want both, combine it with the 9-Point Balance-Sheet Check as a second filter.
For experienced value investors with a contrarian streak who prefer one maximally simple, disciplined rule over a complex factor blend.