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Joel Greenblatt's Magic Formula for India

Indian stocks ranked by Earnings Yield (EBIT/EV) and Return on Capital. Updated daily.

Joel Greenblatt's Magic Formula is a mechanical, two-factor stock ranking introduced in The Little Book That Beats the Market. On this page we apply it to the Indian equity universe: every non-financial listed company with meaningful EBIT and tangible invested capital.

Each eligible company is ranked on Earnings Yield (how much operating profit a buyer would receive per rupee paid for the entire business) and Return on Capital (how efficiently it converts tangible capital into operating earnings). The two ranks are summed; the lowest total is the strongest combined score.

Banks and NBFCs are excluded because their balance-sheet structure makes EBIT/EV non-comparable. For a complementary angle that uses P/E and P/B multiples instead of operating-earnings ratios, see our undervalued Indian stocks screener, or drill into a single company with our fundamental analysis reports. The ranking below is rebuilt nightly from the latest annual filings and closing prices.

How the Magic Formula Works

Joel Greenblatt introduced the Magic Formula in The Little Book That Beats the Market. It ranks stocks on two dimensions and combines those ranks into a single score. No valuation models, no earnings forecasts.

Earnings Yield

EBIT ÷ Enterprise Value. Measures the operating earnings a buyer of the entire business would receive relative to the price of buying it (market cap + debt − cash). A higher yield is better.

Return on Capital

EBIT ÷ (Net Working Capital + Net Fixed Assets). Measures how efficiently a company generates operating earnings from the tangible capital tied up in its operations. A higher return is better.

Combined Ranking

Each eligible company is ranked 1…N on each metric separately, and the two ranks are summed. Lower combined score = better overall.

Exclusions

Banks and NBFCs are excluded because their business model (where interest is revenue) doesn't fit the EBIT/EV framework. Companies with negative EBIT, negative enterprise value, or negative invested capital are also excluded since the ratios aren't meaningful for them.

Showing ranks 6–10 of 327. Top 5 and the rest require a paid plan.

Reviewed by Craytheon Research · Last updated

Disclaimer: A mechanical ranking is a starting point for research, not a buy recommendation. Always conduct your own due diligence and consult a financial advisor before making investment decisions.