These days, hard work is not enough -- efficiency matters just as much. Why not apply that wisdom to your investments, too?

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 reveals how efficiently the company employs its owners' capital. In a nutshell, it essentially gauges your bang per buck as an investor. Take Colgate-Palmolive (NYSE:CL), which boasts an extraordinary ROE of 113. A higher ratio means a more efficient company, and a more effective executive team when it comes to managing the business. These are the sort of companies you should consider for your portfolio.

To uncover some of the most efficient companies out there, I turned to The Motley Fool's CAPS screening tool. I looked for companies with:

  • CAPS ratings of five stars, the highest ratings from our CAPS community.
  • ROEs of 25 or greater.
  • Market caps of $500 million or greater.

Here's what popped up from my screen today:


Market Cap (in billions)

Return on Equity (TTM)

Agrium (NYSE:AGU)



Alliance Holdings



Bristol-Myers Squibb (NYSE:BMY)






Diageo (NYSE:DEO)



Diamond Offshore Drilling (NYSE:DO)



DST Systems



Fluor (NYSE:FLR)



Joy Global (NASDAQ:JOYG)



Western Union



Source: Motley Fool CAPS. TTM = trailing 12 months.

While the stock screener is a great tool, it should be only the first step in your investment research. Examining other levers of specific companies, such as return on invested capital, liquidity, and debt-to-equity ratios, will also help you determine whether a company is right for your portfolio. 

Start increasing the efficiency of your investments at Motley Fool CAPS today. Let the collective wisdom of our 135,000-member-strong investment community help you make better investing decisions.

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Fool contributor Jennifer Schonberger does not own shares of any of the companies mentioned in this article. Western Union is a Motley Fool Stock Advisor selection. Western Union is a Motley Fool Inside Value recommendation. Diageo is a Motley Fool Income Investor selection. The Motley Fool has a disclosure policy.