A company's profits can tell stories when compared against various measures like the stock price (valuation), sales (margins) or past profits (growth). To learn about company efficiency, investors should compare profits with the value of the stuff used to produce them.

Efficient companies produce sizeable profits using relatively modest resources. They can be trusted to put retained earnings to profitable use, and all else held equal, they tend to provide handsome stock returns. Companies with chronically small profits relative to the value of resources they use should consider changing tactics or shedding underperforming businesses. They make good investments only when signs are clear that improvements are underway.

Three commonly used measures for sizing up a company's stuff are: assets, which include pretty much everything to which accountants attach a positive value; equity, which is what's left of assets after subtracting liabilities; and capital, which is calculated by adding together those assets and debts that best reflect the resources a company has put to work. The last measure works well for judging efficiency.

The three companies below all have returns on capital that far exceed their industry averages. They're members of the technology sector, which has enjoyed peppy growth lately. Sales and earnings for each company increased more than 10% last quarter.

Apple

Apple (AAPL) latest quarterly financial report showed a continuation of torrid growth. Sales jumped more than 60% on soaring demand for iPhones and Mac computers, a successful launch of the company's new tablet computer and only a modest decline in sales of music players. Apple generated more than $4 billion in cash during the quarter, bringing its total (including short-term investments) to more than $24 billion, or about 11% of the company's stock market value.

What's next? Rumors that Apple will strike a deal with other carriers beyond AT&T (T) for iPhone service have persisted for years, but AT&T recently warned in its financial filings that exclusive deals with "attractive handsets" could end. Some analysts take that to mean the iPhone could find a much wider customer base next year. Then there's Apple TV, which the company has called a "hobby," and sales of which have fallen to fewer than a million units a year. Kaufman Brothers, an investment bank, reported Wednesday in a client note that its sources say Apple might be significantly upgrading the guts of the device, suggesting "a bigger effort to address the home entertainment space." Changes might include the ability to run applications sold in Apple's iTunes App Store, according to Kaufman Brothers, including video games, "as it has been proven in the market place that there is a large market for casual gaming at inexpensive prices." The stock sells for 17 times forecast earnings for Apple's fiscal year ending Sept. 26.

Microsoft

Apple's success doesn't mean that rival Microsoft (MSFT) is struggling. Quite the opposite: The company is expected to generate $22 billion in free cash this year, rising to $25 billion by 2012. To put that in perspective, recall that Apple holds 11% of its stock market value in cash and such; Microsoft clears that much every year.

According to Jefferies & Company analyst Katherine Egbert, investors should stop expecting Microsoft to innovate like Apple and instead look at the company's history. "Microsoft's best growth came as they adopted technologies, mostly invented by others, to the mass market," Egbert wrote in a July 30 research note. "This includes the operating systems, word processing, spreadsheet, email, database, development tools, browser, console-based games, online search, etc." Egbert compares Microsoft to China, with "inexpensive adaptations of popular technologies," and writes that the company is facing "some of their largest growth opportunities ever," including tablet computers, phone software, cloud computing and search. Skeptical? Shares are priced right for even doubters at just 10 times earnings with a 2.2% dividend yield.

SanDisk

If Apple and Microsoft fans can agree on something, it's that soaring demand for brainy, portable electronics has raised the need for non-mechanical flash memory. Production capacity for such memory looks likely to remain tight through late next year, analysts say. That should benefit companies like SanDisk (SNDK). The firm sells memory in a variety of forms including wafers, chips, cards and internal drives, which gives management flexibility to shift production toward the plumpest margins. Sales for Sandisk are expected to increase 37% this year, and profits are forecasted to more than double. Shares sell for just nine times the 2010 earnings consensus.