7 Tech Stocks With Rising Receivables and Inventory

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 |  Includes: AVGO, DELL, MSFT, SWKS, SYMC, TDC, TXN
by: Kapitall

This list highlights seven tech companies with two very noteworthy trends – they all exhibit accounts receivable and inventory growth in excess of revenue growth. Although there are many possible explanations - good, bad, and neutral - these trends signal that investors should take a closer look.

To create this list, we started with a universe of about 120 tech companies. We crunched the numbers on the most recent quarter's financials, and narrowed down the list to only focus on those companies that have seen accounts receivable and inventory both grow faster than revenue during the most recent quarter.

Sometimes, problems with accounts receivable simply indicate a change in the business (like an acquisition), or a lazy collections department. However, extreme differences between accounts receivable and revenue can also suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms.

On a related note, when a company's inventories are rising at a faster rate than its sales, it may indicate that the company is having trouble selling its merchandise. In extreme cases, the company might have to mark down the value of its inventory.

The bottom line: Use this list as a starting point for your own analysis. Check out the 10-Q and read management discussions to see if there's a good explanation for these trends.

Accounting data sourced from Google Finance, short float and performance data sourced from Finviz.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.


The list has been sorted by market cap.

1. Microsoft Corporation (NASDAQ:MSFT): Application Software Industry. Market cap of $233.33B.
- Growth Trends: MRQ Revenue grew by 4.89% on a y/y basis, while Accounts Receivable grew by 14.99% and Inventory grew by 46.18%.
- Accounts Receivable and Inventory Trends: Accounts Receivable, as a percentage of Current Assets, increased from 21.33% to 21.57%, while inventory, as a percentage of Current Assets, increased from 1.12% to 1.44% (comparing the 3 months ending 2009-12-31 vs. 3 months ending 2010-12-31).
- Other Sentiment Data: Short float at 1.08%, which implies a short ratio of 1.39 days. The stock has gained 1.17% over the last year.

2. Texas Instruments Inc. (NASDAQ:TXN): Semiconductor Industry. Market cap of $41.61B.
- Growth Trends: MRQ Revenue grew by 17.30% on a y/y basis, while Accounts Receivable grew by 18.87% and Inventory grew by 26.46%.
- Accounts Receivable and Inventory Trends: Accounts Receivable, as a percentage of Current Assets, increased from 20.89% to 21.50%, while inventory, as a percentage of Current Assets, increased from 19.66% to 21.53% (comparing the 3 months ending 2009-12-31 vs. 3 months ending 2010-12-31).
- Other Sentiment Data: Short float at 2.74%, which implies a short ratio of 3.27 days. The stock has gained 57.02% over the last year.

3. Dell Inc. (NASDAQ:DELL): Personal Computers Industry. Market cap of $26.81B.
- Growth Trends: MRQ Revenue grew by 19.37% on a y/y basis, while Accounts Receivable grew by 31.57% and Inventory grew by 35.92%.
- Accounts Receivable and Inventory Trends: Accounts Receivable, as a percentage of Current Assets, increased from 30.55% to 35.97%, while inventory, as a percentage of Current Assets, increased from 3.83% to 4.66% (comparing the 13 weeks ending 2009-10-30 vs. 13 weeks ending 2010-10-29).
- Other Sentiment Data: Short float at 3.52%, which implies a short ratio of 3 days. The stock has gained 6.76% over the last year.

4. Broadcom Corp. (BRCM): Semiconductor Industry. Market cap of $23.45B.
- Growth Trends: MRQ Revenue grew by 44.89% on a y/y basis, while Accounts Receivable grew by 61.14% and Inventory grew by 64.99%.
- Accounts Receivable and Inventory Trends: Accounts Receivable, as a percentage of Current Assets, increased from 17.45% to 19.59%, while inventory, as a percentage of Current Assets, increased from 12.44% to 14.29% (comparing the 3 months ending 2009-12-31 vs. 3 months ending 2010-12-31).
- Other Sentiment Data: Short float at 1.72%, which implies a short ratio of 1.18 days. The stock has gained 57.35% over the last year.

5. Symantec Corporation (NASDAQ:SYMC): Security Software & Services Industry. Market cap of $13.86B.
- Growth Trends: MRQ Revenue grew by 3.62% on a y/y basis, while Accounts Receivable grew by 8.32% and Inventory grew by 33.33%.
- Accounts Receivable and Inventory Trends: Accounts Receivable, as a percentage of Current Assets, increased from 22.84% to 25.07%, while inventory, as a percentage of Current Assets, increased from 0.61% to 0.82% (comparing the 13 weeks ending 2010-01-01 vs. 13 weeks ending 2010-12-31).
- Other Sentiment Data: Short float at 1.91%, which implies a short ratio of 1.49 days. The stock has gained 5.95% over the last year.

6. Teradata Corporation (NYSE:TDC): Diversified Computer Systems Industry. Market cap of $7.54B.
- Growth Trends: MRQ Revenue grew by 15.06% on a y/y basis, while Accounts Receivable grew by 26.07% and Inventory grew by 41.30%.
- Accounts Receivable and Inventory Trends: Accounts Receivable, as a percentage of Current Assets, increased from 28.42% to 32.31%, while inventory, as a percentage of Current Assets, increased from 4.01% to 5.11% (comparing the 3 months ending 2009-09-30 vs. 3 months ending 2010-09-30).
- Other Sentiment Data: Short float at 1.13%, which implies a short ratio of 1.44 days. The stock has gained 62.73% over the last year.

7. Skyworks Solutions Inc. (NASDAQ:SWKS): Semiconductor Industry. Market cap of $6.4B.
- Growth Trends: MRQ Revenue grew by 36.71% on a y/y basis, while Accounts Receivable grew by 68.52% and Inventory grew by 45.46%.
- Accounts Receivable and Inventory Trends: Accounts Receivable, as a percentage of Current Assets, increased from 18.75% to 24.48%, while inventory, as a percentage of Current Assets, increased from 15.40% to 17.36% (comparing the 3 months ending 2010-01-01 vs. 3 months ending 2010-12-31).
- Other Sentiment Data: Short float at 7.88%, which implies a short ratio of 3.53 days. The stock has gained 159.05% over the last year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.