3 Stocks Backed by High Efficiency to Boost Portfolio Returns

Core Insights - The article emphasizes the importance of efficiency levels in assessing a company's potential for profitability, suggesting that favorable efficiency ratios correlate positively with price performance [1]. Efficiency Ratios - Receivables Turnover: This ratio measures a company's ability to extend credit and collect debts, calculated as 12-month sales divided by the four-quarter average receivables. A high ratio indicates effective collection practices and quality customers [1]. - Asset Utilization: This ratio assesses how well a company converts its assets into sales, calculated by dividing total sales over the past 12 months by the average total assets over the last four quarters. A higher ratio suggests greater efficiency [2]. - Inventory Turnover: This ratio, calculated as the 12-month cost of goods sold divided by the four-quarter average inventory, indicates a company's ability to manage inventory levels. A high ratio suggests low inventory relative to sales, while a low ratio may indicate declining sales and excess inventory [2]. - Operating Margin: This measure, calculated as operating income over the past 12 months divided by sales, reflects a company's efficiency in managing operating expenses. A higher operating margin indicates better expense control compared to peers [3]. Screening Criteria - The article introduces a screening strategy that includes a favorable Zacks Rank (1 Strong Buy) alongside the efficiency ratios mentioned. Companies with these ratios above industry averages were identified as having higher efficiency levels than their peers [4]. - The screening process narrowed down over 7,906 stocks to six, highlighting three top stocks: - J.Jill (JILL): A specialty retailer of women's apparel with an average four-quarter earnings surprise of 617.6% [4]. - Option Care Health (OPCH): Provides infusion and home care management solutions, with an average four-quarter earnings surprise of nearly 55.5% [4]. - Amphenol (APH): Designs and manufactures various connectors and systems, with an average four-quarter earnings surprise of 6.9% [5].