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Chicago, IL – September 16, 2022 – Stocks in this week’s article are Post Holdings POST, BuildABear Workshop BBW, Equity Bancshares EQBK, Ardmore Shipping ASC and Sally Beauty SBH.
The efficiency ratio is an indication of a company’s financial health. It analyzes how efficiently a company uses its assets and liabilities internally.
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.
To that end, Post Holdings, BuildABear Workshop, Equity Bancshares, Ardmore Shipping and Sally Beauty have made it through the screen process:
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.
Here are the top five stocks that made it through the screen:
Post Holdings
Post Holdings is a consumer-packaged goods holding company, which is involved in the production of center-of-the-store, refrigerated, foodservice, food ingredient and convenient nutrition product categories. POST has an average four-quarter positive earnings surprise of 21.4%.
BuildABear Workshop
BuildABear Workshop is the leading and only national company that provides a make-your-own stuffed animal interactive retail-entertainment experience. BBW has an average four-quarter positive earnings surprise of 21.3%.
Equity Bancshares
Equity Bancshares provides financial services primarily to businesses, business owners and individuals. EQBK has an average four-quarter positive earnings surprise of 17.9%.
Ardmore Shipping
Ardmore Shipping engages in the ownership and operation of product and chemical tankers. ASC has an average four-quarter positive earnings surprise of 9.6%.
Sally Beauty
Sally Beauty is an international specialty retailer and distributor of professional beauty supplies. SBH has an average four-quarter positive earnings surprise of 8.3%.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2751529/5-must-buy-efficient-stocks-for-solid-gains-amid-volatility
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.
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