For Immediate Release
Chicago, IL – December 15, 2021 – Stocks in this week’s article are Tesla, Inc.
TSLA
, Encore Wire Corporation
WIRE
and Alphabet Inc.
GOOGL
.
3 of the Best Efficient Stocks to Enrich Your Portfolio
Efficiency level measures 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. At times it becomes difficult to measure the efficiency level of a company. This is why one must consider popular efficiency ratios while selecting stocks. Nonetheless, these are the efficiency ratios:
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 indicates 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.
For the rest of this Screen of the Week article please visit Zacks.com at:
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Strong Stocks that Should Be in the News
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