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5 Top-Rated Efficient Stocks to Boost Your Portfolio Now

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Tirthankar Chakraborty
·5 min read
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Investors usually opt for a plan that is likely to yield high returns, irrespective of market conditions. Thus, they look for stocks with a solid efficiency level. This is because a company with a promising efficiency level is likely to provide stellar returns as it is believed to be positively correlated with price performance.

So, what is efficiency level? It is the measure of a company’s capability to transform available input into output and is often considered an important parameter for gauging a company’s potential to make profits.

However, at times, it becomes difficult to measure the efficiency level of a company. This is the reason why one must consider popular efficiency ratios while selecting stocks. These efficiency ratios are:

Inventory Turnover: The ratio of 12-month cost of goods sold (COGS) to a four-quarter average inventory is considered one of the most popular efficiency ratios. It indicates a company’s ability to maintain a suitable inventory position. While a high value indicates that the company has a relatively low level of inventory compared to COGS, a low value shows that the company is facing declining sales, which resulted in excess inventory.

Receivables Turnover:  This is the ratio of 12-month sales to four-quarter average receivables. It shows a company’s potential to extend its credit and collect debt in terms of that credit. A high receivables turnover ratio or the “accounts receivable turnover ratio” or “debtor’s turnover ratio” is desirable as it shows that the company is capable of collecting its accounts receivables or that it has quality customers.

Asset Utilization: This ratio indicates a company’s capability to convert assets into output and is thus a widely known measure of efficiency level. It is calculated by dividing total sales over the past 12 months by the last four-quarter average of total assets. Like the above ratios, high asset utilization may indicate that a company is efficient.

Operating Margin: This efficiency measure is the ratio of operating income over the past 12 months to sales over the same period. It measures a company’s ability to control operating expenses. Hence, a high value of the ratio may indicate that the company manages its operating expenses more efficiently than its peers.

Screening Criteria

In addition to the above-mentioned ratios, we have added a favorable Zacks Rank — Zacks Rank #1 (Strong Buy) or 2 (Buy) — to the screen with an objective to make this strategy more profitable.

Inventory Turnover, Receivables Turnover, Asset Utilization and Operating Margin greater than industry average

(Values of these ratios higher than industry averages may indicate that the efficiency level of the company is higher than its peers.)   

The use of these few criteria narrowed down the universe of over 7,906 stocks to 50.

Here are the top five stocks that made it through the screen:

Camping World Holdings Inc. CWH is a provider of services, protection plans, products and resources for recreational vehicle enthusiasts. The company holds a Zacks Rank #1 (Strong Buy). It has an average four-quarter earnings surprise of 103.2%.

Smith & Wesson Brands, Inc. SWBI designs, manufactures and sells firearms. The company, with a Zacks Rank #2 (Buy), has an average four-quarter earnings surprise of 48.7%.

Hubbell Inc HUBB is engaged in the design, manufacture and sale of electrical and electronic products to commercial, industrial, utility and telecommunications markets. This Zacks Rank #2 company has an average four-quarter earnings surprise of 9.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alphabet Inc. GOOGL is one of the most innovative companies in the modern technological age. The company carries a Zacks Rank #2. It has an average four-quarter earnings surprise of 24.8%.

TopBuild Corp. BLD is an installer and distributor of insulation and other building products to the U.S. construction industry. The company holds a Zacks Rank #2. It has an average four-quarter earnings surprise of 20.6%.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance


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Camping World Holdings Inc. (CWH) : Free Stock Analysis Report
 
TopBuild Corp. (BLD) : Free Stock Analysis Report
 
Hubbell Inc (HUBB) : Free Stock Analysis Report
 
Smith & Wesson Brands, Inc. (SWBI) : Free Stock Analysis Report
 
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