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5 Top-Ranked Efficient Stocks Beating Industry Peers on Key Metrics
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Key Takeaways
INDV, RNW, LCUT, NTCT and TNK cleared efficiency screens versus industry averages.
Screen required stronger inventory, receivables, asset utilization and operating margins.
The process narrowed more than 7,906 stocks to 15, with these five among the top picks.
Efficiency level measures a company’s ability to convert productive input into output, and is widely regarded as a key metric for evaluating its profit-generating potential. A company with a high efficiency level is expected to deliver strong returns, as it is generally considered positively associated with price performance.
However, at times, it becomes difficult to measure the efficiency level of a company. This is why one must consider the popular efficiency ratios listed below while selecting stocks.
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.
Inventory Turnover: The ratio of the 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 indicates that the company is facing declining sales, which has resulted in excess inventory.
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) — to the screen to make this strategy more profitable. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inventory Turnover, Receivables Turnover, Asset Utilization, and Operating Margin greater than the 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 15.
Here are the top five stocks that made it through the screen:
Indivior Pharmaceuticals
Indivior Pharmaceuticals operates as a specialty pharmaceutical company, which is engaged in discovering and developing medications and treatments for alcohol addiction, opioid overdose, cocaine intoxication and co-occurring conditions, such as schizophrenia. INDV has an average four-quarter earnings surprise of 65.4%.
ReNew Energy Global
ReNew Energy Global is a renewable energy power producer, which develops, builds, owns, and operates utility-scale wind energy projects, utility-scale solar energy projects, utility-scale firm power projects and distributed solar energy projects. RNW has an average four-quarter earnings surprise of 57.9%.
Lifetime Brands
Lifetime Brands is a leading designer, marketer and distributor of kitchenware, cutlery & cutting boards, bakeware & cookware, pantryware & spices, tabletop and bath accessories. LCUT has an average four-quarter earnings surprise of 50%.
NetScout Systems
NetScout Systems is a leading provider of assurance, cybersecurity, and business intelligence solutions for enterprise and government networks. NTCT has an average four-quarter earnings surprise of 21.1%.
TEEKAY TANK
TEEKAY TANK owns a ship-to-ship transfer business, which performs full-service lightering and lightering support operations principally in the U.S. Gulf and Caribbean. TNK has an average four-quarter earnings surprise of 10.2%.
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5 Top-Ranked Efficient Stocks Beating Industry Peers on Key Metrics
Key Takeaways
Efficiency level measures a company’s ability to convert productive input into output, and is widely regarded as a key metric for evaluating its profit-generating potential. A company with a high efficiency level is expected to deliver strong returns, as it is generally considered positively associated with price performance.
However, at times, it becomes difficult to measure the efficiency level of a company. This is why one must consider the popular efficiency ratios listed below while selecting stocks.
The stocks of Indivior Pharmaceuticals Inc. (INDV - Free Report) , ReNew Energy Global (RNW - Free Report) , Lifetime Brands (LCUT - Free Report) , NetScout Systems (NTCT - Free Report) and TEEKAY TANK LTD (TNK - Free Report) made it through the screening process.
These efficiency ratios are:
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.
Inventory Turnover: The ratio of the 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 indicates that the company is facing declining sales, which has resulted in excess inventory.
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) — to the screen to make this strategy more profitable. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inventory Turnover, Receivables Turnover, Asset Utilization, and Operating Margin greater than the 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 15.
Here are the top five stocks that made it through the screen:
Indivior Pharmaceuticals
Indivior Pharmaceuticals operates as a specialty pharmaceutical company, which is engaged in discovering and developing medications and treatments for alcohol addiction, opioid overdose, cocaine intoxication and co-occurring conditions, such as schizophrenia. INDV has an average four-quarter earnings surprise of 65.4%.
ReNew Energy Global
ReNew Energy Global is a renewable energy power producer, which develops, builds, owns, and operates utility-scale wind energy projects, utility-scale solar energy projects, utility-scale firm power projects and distributed solar energy projects. RNW has an average four-quarter earnings surprise of 57.9%.
Lifetime Brands
Lifetime Brands is a leading designer, marketer and distributor of kitchenware, cutlery & cutting boards, bakeware & cookware, pantryware & spices, tabletop and bath accessories. LCUT has an average four-quarter earnings surprise of 50%.
NetScout Systems
NetScout Systems is a leading provider of assurance, cybersecurity, and business intelligence solutions for enterprise and government networks. NTCT has an average four-quarter earnings surprise of 21.1%.
TEEKAY TANK
TEEKAY TANK owns a ship-to-ship transfer business, which performs full-service lightering and lightering support operations principally in the U.S. Gulf and Caribbean. TNK has an average four-quarter earnings surprise of 10.2%.