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Efficiency level is an important measure for assessing a company’s ability to generate profits. A higher efficiency level is typically associated with better price performance and potential returns. However, measuring efficiency can be challenging. To overcome this, it is important to consider popular efficiency ratios when selecting stocks.

Receivables Turnover is a ratio that shows a company’s ability to extend credit and collect debt. A high ratio indicates that the company can collect its accounts receivables effectively, which is desirable.

Asset Utilization measures a company’s capability to convert assets into output. A high ratio suggests that the company is efficient in utilizing its assets.

Inventory Turnover is a widely used efficiency ratio that indicates a company’s ability to maintain a suitable inventory position. A high value suggests that the company has a relatively low level of inventory compared to cost of goods sold.

Operating Margin is the ratio of operating income to sales over a certain period. It measures a company’s ability to control operating expenses. A high value indicates efficient management of expenses.

To make the strategy more profitable, a favorable Zacks Rank, specifically Zacks Rank #1 (Strong Buy), has been added to the screening criteria. By applying these ratios and the Zacks Rank, a list of stocks has been narrowed down from over 7,906 to 18.

The top five stocks that passed the screening are:
1. LSI Industries (LYTS) – an image solutions company with a positive earnings surprise of 61.2%.
2. Hubbell (HUBB) – engaged in the design, manufacture, and sale of electrical and electronic products, with a positive earnings surprise of nearly 19.9%.
3. Caterpillar (CAT) – the largest global construction and mining equipment manufacturer, with a positive earnings surprise of 18.5%.
4. Owens Corning (OC) – a leader in building materials systems and composite solutions, with a positive earnings surprise of 18.2%.
5. Interface (TILE) – the world’s largest manufacturer of modular carpets, with a positive earnings surprise of 14.2%.

By signing up for a 2-week free trial to the Research Wizard, you can access the complete list and explore more stock options. The Research Wizard is a user-friendly tool that allows you to create and test your own investment strategies.

Disclosure: Officers, directors, and employees of Zacks Investment Research may own or have sold securities mentioned in this material. Performance information for Zacks’ portfolios and strategies can be found at: https://www.zacks.com/performance.

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