The young Blues controlled the game for large periods but were caught out by a superb counter-attacking goal from Everton, finished expertly on the volley by Dominic Calvert-Lewin.
Davies admits City’s failure to produce their usual quality in the final third cost them the game - but says he saw plenty of positives, particularly their desire to compete with one of the most physically imposing teams in the division.
“It was a very close game,” Davies said afterwards. “We knew what Everton would bring to the table - they’re a very hard-working, well-structured team - and we created a few chances without matching our normal supply.
“We didn’t create like we have done in other weeks but I was quite pleased with the performance in terms of the way we did the horrible side of the game, which has sometimes been a question mark over us in previous seasons.
“But they worked really hard, they competed really well with Everton and, surprisingly, it was the end bit that we lacked. We lacked the edge for once and perhaps that’s because we were overcompensating on the competing side of the game, which they did extremely well.”
The EDS take on Borussia Monchengladbach on Wednesday in the UEFA Youth League – a crucial game given City’s two defeats to Barcelona have left them just two points ahead of the Germans with two matches remaining.
Davies now wants to see City blend the desire to compete in every area of the pitch with ruthlessness in the final third.
“We need to put those two things together to get the perfect performance,” Davies said. “That’s part of their development.
“They control a lot of games. Everton’s goal was a counter-attack from our corner and we need to react a little bit quicker from those situations. The goal was a single moment in the game that we didn’t handle so well. I’ve just said to the players in there that we have to do that for 95 minutes – we switched off once and we go punished and on another day you don’t get punished.
“And on another day, we must take the three or four half chances that we had and be ruthless. They had one or two half chances and were ruthless with one of them. We had three or four but lacked the right final pass and a bit of control where it really mattered.
“That’ll be the difference for our players. That’s why the first-team players are where they are. Some of our boys who played today, like Aleix Garcia, Tosin Adarabioyo and Angelino, they play with the first team every day and they know that you have to consistently have the edge technically and tactically.”
