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If you’re considering investing in the beverage industry, one measure of operational health is an analysis of the changes in inventory relative to changes in revenue.

We screened the beverage industry for companies that have seen quarterly revenue growth in excess of inventory growth year-over-year, as well as inventory becoming a decreasing proportion of current assets, both indicating positive inventory trends.

To help understand why these trends are positive, think of why the opposite trends would be negative. If inventory were growing faster than revenue, it would probably indicate that the company is having trouble selling its inventory. Activity ratios such as Inventory Turnover would decrease, and management ratios such as Return on Assets would decrease too, all else constant.



Of course, there are several potential explanations for changes in inventory, such as changes in corporate structure, accounting method, or pricing strategy.

Do you think these companies have healthy operations? Use this list as a starting-off point for your own analysis.

List sorted by difference between quarterly revenue growth and quarterly inventory growth, year-over-year.

1. Coca-Cola Enterprises Inc. (NYSE:CCE):
Beverages Industry. Market cap of $9.32B. Quarterly revenue grew by 22.28% year-over-year, while quarterly inventory decreased by 55.95%. Quarterly inventory, as a percentage of current assets, decreased from 18.77% to 18.16% year-over-year (comparing 3 mo. ending 4/2/10 vs. 3 mo. ending 4/1/11). The stock has gained 69.96% over the last year.



2. Vina Concha y Toro S.A. (NYSE:VCO):
Beverages Industry. Market cap of $1.85B. Quarterly revenue grew by 5.76% year-over-year, while quarterly inventory decreased by 9.28%. Quarterly inventory, as a percentage of current assets, decreased from 44.43% to 39.12% year-over-year (comparing 3 mo. ending 12/31/09 vs. 3 mo. ending 12/31/10). The stock has gained 25.19% over the last year.



3. The Coca-Cola Company (NYSE:KO):
Beverages Industry. Market cap of $153.17B. Quarterly revenue grew by 39.76% year-over-year, while quarterly inventory decreased by -30.34%. Quarterly inventory, as a percentage of current assets, decreased from 13.52% to 12.88% year-over-year (comparing 3 mo. ending 4/2/10 vs. 3 mo. ending 4/1/11). The stock has gained 37.67% over the last year.

4. Dr. Pepper Snapple Group, Inc. (NYSE:DPS):
Beverages Industry. Market cap of $9.17B. Quarterly revenue grew by 6.65% year-over-year, while quarterly inventory decreased by 2.22%. Quarterly inventory, as a percentage of current assets, decreased from 16.56% to 14.89% year-over-year (comparing 3 mo. ending 3/31/10 vs. 3 mo. ending 3/31/11). The stock has gained 14.19% over the last year.

5. Molson Coors Brewing Company (NYSE:TAP):
Beverages Industry. Market cap of $8.58B. Quarterly revenue grew by 4.45% year-over-year, while quarterly inventory decreased by 3.34%. Quarterly inventory, as a percentage of current assets, decreased from 13.81% to 10.48% year-over-year (comparing 13 weeks ending 3/27/10 vs. 13 weeks ending 3/26/11). The stock has gained 16.49% over the last year.

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

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

Source: 5 Beverage Companies With Improving Inventory Trends