The concept of earnings yield and return on capital has recently been explained in 'The Little Book That Beats The Market', by Joel Greenblatt. A website www.magicformulainvesting.com accompanies the book.

The magic formula ranks companies based on two factors: return on capital and earnings yield.

1. Return on Capital = EBIT/(Net Working Capital + Net Fixed Assets)

2. Earnings Yield = EBIT/Enterprise Value

See interactive ebook on iBookstore