Which stocks create the most value with the least capital?

2026-07-30 · By Lubin Danilo, founder of Lubin Investment

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I ranked companies scoring 8 to 10 out of 10 in my quality filter by their Cash ROCE, the cash every dollar reinvested in the business earns back each year. At the top: AppLovin (205%), Frontdoor (181%) and Booking Holdings (162%), business models so capital-light they turn nearly every reinvested dollar into several dollars of annual cash.

A different criterion from the usual rankings

Most stock rankings are built by size (market cap), sales growth, or valuation (P/FCF). I wanted to build a different one: ranking by Cash ROCE, the return on capital genuinely reinvested in the business. The question it asks is simple but rarely highlighted: for every dollar a company puts back into its business (new equipment, new products, expansion), how much cash does that earn back each year? A Cash ROCE of 20% means every reinvested dollar earns back 20 cents of cash a year. Above 100%, the company recovers more than a dollar of cash each year for every dollar reinvested, a sign of an extremely capital-light business model.

I already explained this concept in detail on a single case in my Cash ROCE guide. Here, I change the angle: I rank, across the universe of companies scoring 8 to 10 out of 10 in my quality filter (already screened for profitability, growth, and financial discipline), those that best turn reinvested capital into available cash.

The ranking: software and digital platforms dominate

Here is a sample of the ranking, companies scoring 8 to 10 out of 10, ranked by descending Cash ROCE. All figures come from my filter as of publication and can shift from one quarter to the next.

Why do software and platforms dominate this ranking?

The mechanism is structural: a software or digital platform company sells a product that costs almost nothing to duplicate once developed (one more subscription needs no factory, no inventory, no extra raw material), while an industrial company must build a new plant or buy new machinery to sell one more unit. That is why AppLovin, Booking Holdings and Frontdoor dominate: their base capital (servers, the technology platform) stays largely fixed while their revenue climbs, which mechanically multiplies the return on every dollar of capital already in place.

ASML is the interesting counter-example on this list: it is an industrial company (it makes some of the most complex lithography machines in the world, essential to producing the most advanced computer chips), but its de facto monopoly on this technology lets it sell each machine at such a high margin that Cash ROCE climbs despite very real physical capital needs. This is the mechanism of a technology monopoly rather than a pure asset-light model.

What this ranking does NOT say

A high Cash ROCE says nothing about the price paid for the stock: ASML shows a P/FCF of 54.2x, one of the highest on the list, meaning the market has already widely recognized and priced in the quality of its model. Conversely, CGI Inc. shows a Cash ROCE of 92% for a P/FCF of just 12.4x, a rare combination of high capital returns and a moderate price. Cash ROCE measures the quality of the economic engine, not whether it is cheap or expensive today: the two questions stay separate, as always in my method.

How I use this ranking

I use it as a starting point, not a conclusion: a high Cash ROCE confirms a company has a business model that multiplies every reinvested dollar, a strong fundamental quality signal. But before investing, I always then look at the price paid (P/FCF within its own history) and the growth trajectory. That is exactly the framework I wanted to automate in my stock analysis tool: the quality of capital employed on one side, the price on the other, never mixed together.

• Cash ROCE measures how much cash every dollar reinvested in the business earns back each year; above 100%, the company recovers more than a dollar of cash for every dollar reinvested.
• Software and digital platforms dominate this ranking (AppLovin 205%, Frontdoor 181%, Booking Holdings 162%) thanks to fixed base capital that does not grow at the same pace as revenue.
• ASML is the industrial exception: its technology monopoly on advanced lithography enables a 117% Cash ROCE despite real physical capital needs.
• A high Cash ROCE says nothing about price: CGI Inc. combines a 92% Cash ROCE with a P/FCF of just 12.4x, while ASML shows 117% for a P/FCF of 54.2x.
• I use this ranking as a starting point on business-model quality, never as a standalone buy signal: price is always judged separately.

FAQ

What is Cash ROCE?

The return on capital genuinely reinvested in the business: for every dollar put into the business (new equipment, expansion), how much cash that earns back each year. A Cash ROCE of 20% means 20 cents of annual cash per reinvested dollar.

Why do software companies have such high Cash ROCE?

Because a software product costs almost nothing to duplicate once developed: selling one more subscription needs no factory, no extra inventory. Base capital stays fixed while revenue climbs, multiplying the return on every dollar already invested.

Does a high Cash ROCE mean you should buy the stock?

No. Cash ROCE measures the quality of the business model, not the price paid to access it today. A company with excellent Cash ROCE can be expensive (ASML, P/FCF 54.2x) or moderately valued (CGI Inc., P/FCF 12.4x): both must always be judged separately. This is not personalized investment advice, do your own research.

How does ASML show such a high Cash ROCE while making physical machines?

Thanks to its de facto monopoly on the most advanced lithography machines, essential to manufacturing cutting-edge computer chips. This dominant position lets it sell each machine at a very high margin, largely offsetting its real physical capital needs.

Related reading

• Does a perfect quality score protect you from the market?
• Owner's earnings: Warren Buffett's favorite measure
• How to read a company balance sheet in 5 minutes

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About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).