Focus on return on capital and earnings yield from "summary" of The Little Book That Beats the Market by Joel Greenblatt
The key to successful investing is to focus on return on capital and earnings yield. Return on capital is a measure of how efficiently a company uses its capital to generate profits. It is calculated by dividing a company's earnings before interest and taxes by its total capital. Companies with a high return on capital are able to generate more profits with less capital, which is a good indicator of a strong business.
Earnings yield, on the other hand, measures the return that an investor can expect to earn on a stock based on its current price. It is calculated by dividing a company's earnings per share by its current stock price. A high earnings yie...
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