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5 High-Efficient Stocks Backed by Strong Financial Metrics
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Key Takeaways
Wayfair is among five stocks passing screens for inventory, receivables, asset use and operating margin.
UNFI made the list after meeting efficiency ratio criteria and carries a Zacks Rank #1 (Strong Buy).
GRC joins four other companies that passed a financial efficiency screen based on industry comparisons.
The efficiency ratio is an important measure of a company's overall financial health. It shows how well the company manages its day-to-day operations by measuring how efficiently it controls costs while generating revenues. Specifically, it quantifies how optimally the business deploys its assets and handles its liabilities to maximize revenues and minimize unnecessary expenses.
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 Using Research Wizard:
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 16.
Here are the top five stocks that made it through the screen:
Wayfair
Wayfairis one of the world's leading online sellers of home goods products, consisting of furniture and home decor. W has an average four-quarter earnings surprise of 56.7%.
United Natural Foods
United Natural Foods is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. UNFI has an average four-quarter earnings surprise of 29.9%.
WD40
WD40 Financial engages in the provision of maintenance products and home care and cleaning products in North America, Central and South America and internationally. WDFC has an average four-quarter earnings surprise of 18.3%.
Natural Gas Services Group
Natural Gas Services Group manufactures, fabricates, sells, rents and services natural gas compressors that enhance the production of natural gas wells. NGS has an average four-quarter earnings surprise of 18%.
GormanRupp
GormanRupp designs, manufactures and sells pumps and related equipment (pump and motor controls) for use in water, wastewater, construction, industrial, petroleum, original equipment, agricultural, fire protection, military and other liquid-handling applications. GRC has an average four-quarter earnings surprise of 17.6%.
View the Zacks #1 Rank List
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5 High-Efficient Stocks Backed by Strong Financial Metrics
Key Takeaways
The efficiency ratio is an important measure of a company's overall financial health. It shows how well the company manages its day-to-day operations by measuring how efficiently it controls costs while generating revenues. Specifically, it quantifies how optimally the business deploys its assets and handles its liabilities to maximize revenues and minimize unnecessary expenses.
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.
Wayfair (W - Free Report) , United Natural Foods (UNFI - Free Report) , WD40 (WDFC - Free Report) , Natural Gas Services Group (NGS - Free Report) and GormanRupp (GRC - Free Report) have made it through the screen process:
Efficiency Ratios – to be Considered
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 Using Research Wizard:
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 16.
Here are the top five stocks that made it through the screen:
Wayfair
Wayfairis one of the world's leading online sellers of home goods products, consisting of furniture and home decor. W has an average four-quarter earnings surprise of 56.7%.
United Natural Foods
United Natural Foods is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. UNFI has an average four-quarter earnings surprise of 29.9%.
WD40
WD40 Financial engages in the provision of maintenance products and home care and cleaning products in North America, Central and South America and internationally. WDFC has an average four-quarter earnings surprise of 18.3%.
Natural Gas Services Group
Natural Gas Services Group manufactures, fabricates, sells, rents and services natural gas compressors that enhance the production of natural gas wells. NGS has an average four-quarter earnings surprise of 18%.
GormanRupp
GormanRupp designs, manufactures and sells pumps and related equipment (pump and motor controls) for use in water, wastewater, construction, industrial, petroleum, original equipment, agricultural, fire protection, military and other liquid-handling applications. GRC has an average four-quarter earnings surprise of 17.6%.