These days, it's not all about working hard. It's more about working hard and efficiently. 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 measures your bang per buck as an investor.

Take Philip Morris International (NYSE:PM), which rocks a whopping ROE of 95.8% over the past four quarters. Or look at Foster Wheeler (NASDAQ:FWLT), which boasts an ROE of 52.4%.

Companies can juice their ROE by employing more debt, so it's important to consider a company's debt level when looking at ROE. All else being equal, though, the higher the ROE, 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.

To uncover some of the most efficient companies around, I ran a screen using The Motley Fool's CAPS screening tool. I looked for companies with:

  • CAPS ratings of five stars, the highest 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:


Market Cap (in billions)

Return on Equity (TTM)

Foster Wheeler



Gilead Sciences (NASDAQ:GILD)



Infosys Technologies (NASDAQ:INFY)



Partner Communications (NASDAQ:PTNR)



PepsiCo (NYSE:PEP)



Philip Morris International



Data from Motley Fool CAPS. TTM = trailing 12 months.

While the stock screener is a great tool, it should only be the first step in your investment research. Double-checking why a company might have a really high ROE is a good first step. For instance, Philip Morris' ROE is so high because the level of equity has been lowered thanks to a massive share buyback program over the past couple of years.

Further steps -- for example, examining other levers of specific companies, such as return on invested capital, liquidity, and debt-to-equity ratios -- will also help you determine if a company is right for your portfolio. When you include those other metrics in your analysis, you'll get a fuller picture of whether that company is worth buying.

Start increasing the efficiency of your investments at Motley Fool CAPS today. Let the collective wisdom of our 145,000-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. You can follow her on Twitter. Philip Morris International is a Motley Fool Global Gains recommendation. Pepsi and Partner Communications are Income Investor picks. The Motley Fool has a disclosure policy.