High return on capital
EBIT divided by tangible capital employed. Greenblatt uses this instead of ROIC because it strips out goodwill and excess cash, leaving the real productivity of operating assets.
Definition
What is the Greenblatt-Fit Score?
The Greenblatt-Fit Score is a 0 to 100 grade for how closely a stock fits Joel Greenblatt's Magic Formula: high return on capital combined with a high earnings yield. invest-like computes it for 21,000+ stocks across 68 countries, roughly half listed outside the US.
Last reviewed:
Short answer
Greenblatt-Fit grades a stock from 0 to 100 against the two-factor Magic Formula Joel Greenblatt published in The Little Book That Beats the Market: rank stocks by return on capital (EBIT over tangible capital), rank again by earnings yield (EBIT over enterprise value), pick the top of the combined ranks. The score maps to an A+ to D grade ladder shared across all seven invest-like framework scores. Educational fit assessment, never advice.
How the Greenblatt-Fit Score is calculated
invest-like pulls daily fundamentals, computes EBIT, the tangible capital base, and enterprise value for every eligible stock, then ranks the universe twice (once by return on capital, once by earnings yield). The lower the combined rank, the higher the Greenblatt-Fit Score. Each ticker gets a sub-score per factor with one paragraph of LLM-generated reasoning explaining the signal.
High earnings yield
EBIT divided by enterprise value. Captures the operating earnings a buyer would receive relative to the price paid for the whole business, debt and cash included.
Combined ranking
Greenblatt ranks every stock by ROC, ranks again by earnings yield, sums the two ranks, and picks the lowest combined number. Buy 20 to 30, hold for one year, rotate.
Liquid universe
Magic Formula explicitly excludes utilities, financials, and very small caps to keep the metrics comparable. invest-like applies the same universe filter.
Why Greenblatt-Fit matters
The Magic Formula is the most replicable value strategy ever published. It is purely quantitative, free of subjective management calls, and Greenblatt's own 17-year backtest showed roughly 30 percent annual returns before fees. Treating Greenblatt-Fit as one of seven lenses surfaces high-ROC value at any moment in the cycle.
See the Magic Formula concept page at /learn/what-is-magic-formula/ for the underlying mechanics.
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Related
- Seven-framework methodology hub - how Greenblatt-Fit sits alongside the other six value-investing frameworks invest-like scores every stock against.
- Top Greenblatt-fit stocks today - the live Magic Formula combined ranking of 21,000+ stocks across 68 countries on return on capital and earnings yield.
- Cross-framework working papers - evidence on how Magic-Formula combined ranks perform across decades of US-listed data.
See the Greenblatt-Fit grade for any stock
Every verdict page on invest-like shows the Greenblatt-Fit grade next to the other six framework scores.
Educational only. invest-like is not a registered investment adviser; nothing here is personalised investment advice. Always do your own research and consider your individual circumstances.