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Are you an investor looking to invest in the oil & gas sector? Do you also consider sales trends, and inventory turnover when evaluating a company's stock? If yes, we researched companies with this in mind.

We focused on 2 statistics from the balance sheet, namely the growth in receivables, and inventories.

Although receivables are considered to be an asset, it becomes a risk when receivables grow and revenues decline. We looked through more than 30 balance sheets to find those with negative trends in revenue relative to accounts receivable, with slower growth in revenue year-over-year than growth in accounts receivable, as well as receivables comprising a larger portion of current assets.

Receivables represent the portion of revenue not yet collected, so the smaller the portion of revenue and current assets, the better.

We didn't stop here!

We then moved to looking at growth in quarterly revenue slower than growth in quarterly inventory year-over-year. We also looked for companies with quarterly inventory increasing as a percent of current assets.

When revenue is growing slower than inventory, it may indicate that the company is having trouble selling its inventory - although this might just indicate inventory building or a change in sales policies.

We were left with 3 companies on our list. We would also like to note that all 3 companies report earnings in the next 3 weeks.

Interactive Chart: Press Play to compare changes in analyst changes over the last two years for the three stocks mentioned below.

Do you think it's time to stay cautious of these stocks? Use the list below as a starting point for your analysis.

1. C&J Energy Services, Inc. (CJES): Provides specialty equipment services for oil and natural gas exploration and production companies in the Texas, Louisiana, and Oklahoma regions of the United States.

  • Market cap at $1.21B, most recent closing price at $22.93.
  • Revenue grew by 34.39% during the most recent quarter ($307.8M vs. $229.03M y/y). Accounts receivable grew by 113.44% during the same time period ($189.28M vs. $88.68M y/y). Receivables, as a percentage of current assets, increased from 50.46% to 64.89% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • Inventory grew by 173.06% during the same time period ($73.59M vs. $26.95M y/y). Inventory, as a percentage of current assets, increased from 15.33% to 25.23% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • The company is expected to report earnings on February 13th, 2013.

2. Dril-Quip, Inc. (DRQ): Designs, manufactures, fabricates, inspects, assembles, tests, and markets engineered offshore drilling and production equipment for use in deepwater, harsh environment, and severe service applications worldwide.

  • Market cap at $3.28B, most recent closing price at $81.08.
  • Revenue grew by 23.11% during the most recent quarter ($190.86M vs. $155.03M y/y). Accounts receivable grew by 29.83% during the same time period ($240.84M vs. $185.51M y/y). Receivables, as a percentage of current assets, increased from 24.73% to 27.% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • Inventory grew by 29.81% during the same time period ($350.05M vs. $269.66M y/y). Inventory, as a percentage of current assets, increased from 35.96% to 39.25% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • The company is expected to report earnings on February 25th, 2013.

3. Imperial Oil Ltd. (IMO): Engages in the exploration, production, and sale of crude oil and natural gas in Canada.

  • Market cap at $37.4B, most recent closing price at $44.12.
  • Revenue grew by 4.92% during the most recent quarter ($8,336M vs. $7,945M y/y). Accounts receivable grew by 11.25% during the same time period ($2,363M vs. $2,124M y/y). Receivables, as a percentage of current assets, increased from 43.5% to 48.19% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • Inventory grew by 25.66% during the same time period ($1,239M vs. $986M y/y). Inventory, as a percentage of current assets, increased from 20.19% to 25.27% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • The company is expected to report earnings on March 1st, 2013.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: 3 Oil & Gas Stocks With Troubling Accounting Signals