Magic Formula
Greenblatt’s combined ranking of cheap (high earnings yield) and good (high ROIC) businesses.
Formula
Combined Rank = Rank(EY) + Rank(ROIC)
Greenblatt Magic Formula Calculator
Rank a stock on Joel Greenblatt’s combined Magic Formula score: ROIC (good business) plus earnings yield (good price). Pick a ticker to see its real rank within the full ValueMarkers universe of 80,000+ stocks.
Inputs
%
%
Result
ROIC + EY
0.0%
Pick a ticker to compute the universe rank.
How to read. Greenblatt buys roughly the top 20–30 ranked names, holds for a year, and repeats. Lower combined rank means the stock screens better on the Magic Formula’s "good business at a good price" criteria.
Reference
Term explanations
Every input and output on this page, explained in plain English. Hover the info icons in the calculator above to see the same content inline.
ROIC (Return on Invested Capital)
How efficiently a company turns the capital it has raised into profits, after tax.
Formula
ROIC = NOPAT / Invested Capital
How to read the result
> 15
Strong5/5
Comfortably above typical cost-of-capital.
8 – 15
Acceptable3/5
Around average; check trend and WACC.
< 8
Weak1/5
Likely destroying value vs. cost of capital.
Earnings Yield (Greenblatt)
Greenblatt’s capital-structure-neutral version of E/P.
Formula
EY = EBIT / Enterprise Value
How to read the result
> 8
High5/5
Cheap on operating-earnings basis.
5 – 8
Moderate3/5
Around market average.
< 5
Low1/5
Expensive on operating-earnings basis.
FAQ
Frequently asked questions
Joel Greenblatt’s 2005 ranking system from "The Little Book That Beats the Market" — rank stocks on (1) earnings yield (cheapness) and (2) ROIC (quality), then sum the ranks. Lower combined rank means a better candidate.
Educational tool only. The outputs above are produced by a deterministic formula from the values you enter. They are not a recommendation to buy, hold, or sell any security and are not investment advice. Always do your own research and consider consulting a licensed advisor before making investment decisions.
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