Earlier this month, Goldman Sachs’ equity research team put out a note highlighting 19 US-listed stocks that look both reasonably priced and well suited to the current economic moment.

It’s a broad, diverse list, unconstrained by sector or size. Fourteen sub-sectors are represented, including managed care, tobacco, agribusiness and luxury fashion, while there is space for both the world’s largest company by value, Apple (US:AAPL), and Sapiens International (US:SPNS), an insurance software provider whose $1.2bn (£1bn) market cap excludes it from the S&P 500.

The mini screen is more concerned about fundamentals. The criteria for inclusion (in addition to a buy rating from Goldman analysts) are as follows:

• A cash return on capital invested (CROCI) that is consistently higher than the weighted average cost of capital (WACC)
• A record of cash generation, as demonstrated by a positive and growing free cash flow yield
• A solid balance sheet, as shown by a net debt to cash profit ratio of 1.5 or less by 2024

There are good reasons why investors should seek out these credentials in any year, although the past 13 months’ brutal increase in interest rates and therefore the risk-free rate has raised the stakes. Not only does equity and debt cost more, but companies’ ability to generate a growing cash return on their investments has been complicated by rising costs and a weaker economic outlook.

An ability to generate surplus cash, in the shape of free cash flow, is therefore a sign of a business capable of handling current pressures. So, too, is a more conservative approach to leverage, particularly as companies come to refinance debt issued when interest rates were on the floor.

With the tools at my disposal (FactSet consensus forecasts, rather than the collective research efforts of a Wall Street giant), I have tried to adapt and tighten the methodology for the UK market. That means:

• A CROCI that is at least twice the cost of equity (calculated as a share’s one-year beta multiplied by the risk-free rate from US Treasuries, plus UK equities’ risk premium)
• An average free cash flow yield of at least 7 per cent over the next two financial years
• A current net debt to cash profit ratio of 1.5 or less

In swapping a company’s WACC for its cost of equity – which incorporates NYU professor Aswath Damodaran’s equity risk premium for the UK market – I am both simplifying things and setting a higher bar for capital returns. In the FTSE All-Share, the cost of equity ranges from 4 to 14 per cent, although almost nine-tenths of stocks are in the 6 to 12 per cent range and the median is 8.3 per cent.

I also prefer existing to forecast leverage, given the difficulties of correctly estimating profit and debt figures, and the fact that most businesses are looking to de-gear.

Applied to the data available for the FTSE All-Share’s constituents, 11 companies pass all three tests.

As the table below shows, it’s a much less diverse group than the Goldman list. But while low share price volatility has probably underplayed true cost of capital for several names – especially Harbour Energy (HBR), Petra Diamonds (PDL), Diversified Energy (DEC) and EnQuest (ENQ) – this is a group whose low valuations seem to belie their strong cash returns and balance sheets.

Still, all measures of corporate health can be deceptive. For the oil, gas and mining stocks in this clique, the persistence of the favourable current balance between capital costs and returns will depend in large part on the commodity prices beyond their control.

Investors appear to have cottoned on. So far this year, price comparison site Moneysupermarket.com (MONY), home furnishings retailer Dunelm (DNLM), lighting group Luceco (LUCE) and GSK (GSK) have all seen their shares rise. The only resources name to join them: BP (BP.).