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All of the companies mentioned below have seen inventories grow faster than revenues during the most recent quarter, an accounting trend that deserves closer attention.

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.

But there are often good explanations for a deviation between inventory and sales growth. Companies can decide to increase inventories because they are growing more confident about the economy and seeing demand growth. In other examples, companies might make changes to the way they report inventory positions, or a change in the company's structure might skew the data.

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 this trend.

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



The list has been sorted by the difference between revenue and inventory growth rates.

1. Dycom Industries Inc. (NYSE:DY): Heavy Construction Industry. Market cap of $578.59M. MRQ revenue grew by 0.95% on a y/y basis, much slower than inventory growth at 94.85%. Inventory, as a percentage of current assets, increased from 2.36% to 5.03% (comparing 13 weeks ending 2010-10-30 vs. 13 weeks ending 2010-10-30). Short float at 3.21%, which implies a short ratio of 3.31 days. The stock has gained 91.29% over the last year.

2. Griffon Corporation (NYSE:GFF): General Building Materials Industry. Market cap of $790.63M. MRQ revenue grew by 35.8% on a y/y basis, much slower than inventory growth at 106.5%. Inventory, as a percentage of current assets, increased from 17.31% to 36.71% (comparing 3 months ending 2010-12-31 vs. 3 months ending 2010-12-31). Short float at 3.99%, which implies a short ratio of 7.48 days. The stock has gained 1.2% over the last year.

3. Ener1, Inc. (NASDAQ:HEV): Industrial Electrical Equipment Industry. Market cap of $617.31M. MRQ revenue grew by 112.56% on a y/y basis, much slower than inventory growth at 180.29%. Inventory, as a percentage of current assets, increased from 20.94% to 21.93% (comparing 3 months ending 2010-09-30 vs. 3 months ending 2010-09-30). Short float at 5.27%, which implies a short ratio of 5.73 days. The stock has lost -16.74% over the last year.

4. Trex Co. Inc. (NYSE:TREX):
Lumber, Wood Production Industry. Market cap of $417.42M. MRQ revenue dropped -2.21% on a y/y basis, much slower than inventory growth at 51.88%. Inventory, as a percentage of current assets, increased from 38.73% to 49.63% (comparing 3 months ending 2010-09-30 vs. 3 months ending 2010-09-30). Short float at 18.39%, which implies a short ratio of 19.33 days. The stock has gained 50.75% over the last year.

5. MasTec, Inc. (NYSE:MTZ): Heavy Construction Industry. Market cap of $1.29B. MRQ revenue grew by 59.08% on a y/y basis, much slower than inventory growth at 98.84%. Inventory, as a percentage of current assets, increased from 7.48% to 9.43% (comparing 3 months ending 2010-09-30 vs. 3 months ending 2010-09-30). Short float at 6.24%, which implies a short ratio of 5.59 days. The stock has gained 25.93% over the last year.

6. The Valspar Corporation (NYSE:VAL): General Building Materials Industry. Market cap of $3.79B. MRQ revenue grew by 25.29% on a y/y basis, much slower than inventory growth at 63.63%. Inventory, as a percentage of current assets, increased from 26.31% to 32.02% (comparing 13 weeks ending 2011-01-28 vs. 13 weeks ending 2011-01-28). Short float at 3.77%, which implies a short ratio of 3.85 days. The stock has gained 44.24% over the last year.

7. Alliant Techsystems Inc. (NYSE:ATK): Aerospace/Defense Products and Services Industry. Market cap of $2.44B. MRQ revenue dropped -1.07% on a y/y basis, much slower than inventory growth at 26.44%. Inventory, as a percentage of current assets, increased from 12.7% to 13.6% (comparing 3 months ending 2011-01-02 vs. 3 months ending 2011-01-02). Short float at 2.64%, which implies a short ratio of 2.85 days. The stock has lost -7.48% over the last year.

8. Regal Beloit Corporation (NYSE:RBC): Industrial Electrical Equipment Industry. Market cap of $2.85B. MRQ revenue grew by 19.95% on a y/y basis, much slower than inventory growth at 45.29%. Inventory, as a percentage of current assets, increased from 27.45% to 35.9% (comparing 3 months ending 2011-01-01 vs. 3 months ending 2011-01-01). Short float at 5.82%, which implies a short ratio of 5.7 days. The stock has gained 29.99% over the last year.

9. Graco Inc. (NYSE:GGG):
Diversified Machinery Industry. Market cap of $2.56B. MRQ revenue grew by 34.84% on a y/y basis, much slower than inventory growth at 56.19%. Inventory, as a percentage of current assets, increased from 31.04% to 36.3% (comparing 13 weeks ending 2010-12-31 vs. 13 weeks ending 2010-12-31). Short float at 5.75%, which implies a short ratio of 9.97 days. The stock has gained 56.75% over the last year.

10. L-3 Communications Holdings Inc. (NYSE:LLL): Aerospace/Defense Products and Services Industry. Market cap of $9.3B. MRQ revenue grew by 1.12% on a y/y basis, much slower than inventory growth at 17.44%. Inventory, as a percentage of current assets, increased from 4.97% to 6.01% (comparing 3 months ending 2010-12-31 vs. 3 months ending 2010-12-31). Short float at 3.21%, which implies a short ratio of 3.66 days. The stock has lost -9.24% over the last year.

Source: 10 Industrial Goods Stocks With Rapidly Rising Inventories