Two questions, one score: how profitably does the capital work, and how cheaply can you get the operating business? 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: -130.5 percentage points total, -5.3 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 |
|---|---|---|---|---|---|
| -4 | 5,554 | 0 | 0 | 4,492 | 1,062 |
| -3 | 0 | 0 | 0 | 0 | 0 |
| -2 | 1,189 | 0 | 0 | 961 | 228 |
| -1 | 509 | 0 | 0 | 404 | 105 |
| 0 | 1,222 | 0 | 0 | 1,100 | 122 |
| +1 | 1,959 | 0 | 0 | 1,795 | 164 |
| +2 | 692 | 0 | 0 | 681 | 11 |
| +3 | 1,797 | 0 | 0 | 1,084 | 713 |
| +4 | 810 | 0 | 797 | 0 | 13 |
| +5 | 887 | 870 | 0 | 0 | 17 |
| +6 | 997 | 975 | 0 | 0 | 22 |
| +7 | 0 | 0 | 0 | 0 | 0 |
| +8 | 382 | 372 | 0 | 0 | 10 |
| +9 | 0 | 0 | 0 | 0 | 0 |
| +10 | 184 | 179 | 0 | 0 | 5 |
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 “Quasi-monopoly returns (ROC ≥ 40%)”.
In this profile, each rule that is met counts +1 to +5 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.
Return on capital (ROC) measures what every invested euro earns operationally.
EV/EBIT values operating profit from an acquirer's perspective, debts included.
The upper score threshold sits at 5 points: a single top factor (+5) is enough if the other factor isn't negative. The ranking by score still favors strong combinations of both factors.
Value destroyers (ROC below 5%) and unprofitable or massively overpriced names take deductions.
These exact rules run over every stock daily.
After signing up for free, you can copy the full profile in the rule editor, adjust its thresholds, and save it as your own starting profile.
See and copy all rules for freeIndex, start = 100
The backtest shows a total return of +109.6%. 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: Profitability, Valuation. Filled means at least one rule in the category is met.
For investors with patience and discipline: the cheapest combinations of quality and price usually come with short-term bad news attached. If you trust the valuation anchor and deliberately ignore momentum, this is your lens.
The two-factor strategy hunts for the rare combination of above-average capital returns and an attractive valuation. The principle became famous as Joel Greenblatt's “Magic Formula”: good companies (high return on capital) at cheap prices (high earnings yield, i.e. low EV/EBIT) beat the market over time. StockScorer translates the original ranking into fixed point tiers: every stock is measured against absolute thresholds rather than the rest of the universe, keeping the score fully traceable at all times. As in the original, financials and utilities are excluded by an exclusion rule: Greenblatt's own FAQ cites the “unique nature of their financial accounting statements” as the reason.
An exclusion rule first excludes financials and utilities: capital-return metrics are not meaningfully defined for them, matching the original. Then both factors are translated into disjoint point tiers. Capital returns: an ROC of 40% or more (quasi-monopoly competitive advantages) earns +5 points, 25–40% +3, 15–25% +1; below 5% or missing scores −2. Valuation: an EV/EBIT below 6.7 (equivalent to an earnings yield above 15%) earns +5, up to 10 +3, up to 16.7 +1; from 33.3 or with no multiple (negative EBIT) −2.
The sum of both ladders yields a score from −4 to +10. The upper threshold is 5 points, the same for every size class: the original has no size tiers. A single top factor (+5 points) is enough for a high match this way, as long as the other factor isn't negative. The ranking by score still favors strong combinations of both factors: it sorts higher-scoring stocks first into the top lists, while single-factor strength mainly fills otherwise open slots.
No financials or utilities: exclusion rule, excluded as in the original ("unique nature of their financial accounting statements").
Return on capital (ROC): operating profit (EBIT) relative to tangible capital employed. Since the fidelity round, StockScorer uses Greenblatt's own definition, EBIT divided by net working capital plus net fixed assets (goodwill excluded), instead of the broader return-on-capital-employed measure.
EV/EBIT: enterprise value (market capitalisation plus net debt) divided by operating profit. Unlike the P/E ratio, this multiple cannot be dressed up with balance-sheet leverage.
Point tiers: +5/+3/+1 per factor, −2 for value destruction or massive overvaluation. A missing EV/EBIT deliberately counts as the worst tier. Negative EBIT produces no multiple.
Greenblatt's original builds a relative ranking across the whole universe (“the 30 best ranks”). StockScorer instead uses absolute thresholds derived from historical deciles: a stock's score depends only on its own numbers, not on the composition of the universe. That is more transparent, though in extreme market phases it can produce more or fewer hits than a fixed ranking would.
Since the 23 August 2026 fidelity round, capital returns follow Greenblatt's own formula (EBIT divided by net working capital plus net fixed assets) instead of the previously used ROCE approximation: tangible capital excluding goodwill captures a business's capital intensity more precisely than a leverage-neutralised total-capital return. Greenblatt also recommends a one-year holding period per position (for tax reasons and to give mean reversion time to work); the cap thresholds are unified since the round, matching the original, which does not tier by size either.
The famous psychological hurdle remains: high-scoring stocks are frequently names with short-term bad news (mean reversion). The strategy demands looking systematically at exactly the moments when it feels uncomfortable.
For fundamental value investors who appreciate a clear, two-dimensional logic and can live with interim underperformance until the market recognises the mispricing.