These days, it's not all about working hard. It's more
about working hard
andefficiently. Why not apply that strategy to your
investments?
To
measure a company's efficiency, you can examine its
return on equity (ROE). This ratio is composed of a company's
profit margin multiplied by its asset turnover, multiplied by
its financial leverage. It measures how efficiently the
company employs its owners' capital. In a nutshell, it
essentially measures your bang per buck as an investor.
Take
Philip Morris International (NYSE: PM), which
rocks a whopping ROE of nearly 100%, as an example. Or look
at
Foster Wheeler (Nasdaq: FWLT), which boasts
an ROE of 68%. The higher the ratio, the better -- a higher
ratio means a more efficient company, which means a more
effective executive team when it comes to managing the
business. It's companies like these you should consider for
your portfolio. The more efficient the company is, the
better.
To uncover some of the most efficient companies out there,
I did a screen using the Motley Fool's
CAPS screening tool. I looked for companies with:
ratingsof five stars, the highest ratings granted by
our CAPS community
ROEs of 25% or greater.
Market caps of $500 million or greater.
And voila! Here's what popped up from my screen
recently:
Company
Market Cap (in billions)
Return on Equity (TTM)
3M (NYSE: MMM)
$54.3
26.3%
Abbott Laboratories (NYSE: ABT)
$79.3
28.9%
Amerigas Partners
$2.2
55.8%
Diana Shipping (NYSE: DSX)
$1.1
28.6%
Fluor Corp. (NYSE: FLR)
$8.91
25.5% Continued... |