Inventory is a very interesting tool for gaining insight into the health of a company’s sales trends. Companies with revenue growth out-pacing inventory growth are generally seen as having healthier sales. When inventory growth exceeds revenue growth, it may be a sign that the company is having trouble selling its inventory.
Of course, growing inventory can also signal inventory building.
We ran a screen on stocks of the S&P 500 outperforming the index, with quarterly return greater than 10%. We screened these stocks for those exhibiting positive inventory trends: Growth in revenue out-pacing growth in inventory year-over-year, as well as inventory becoming a smaller part of current assets.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.
Click to enlarge
Do you think these companies have strong sales? Use this list as a starting point for your own analysis.
List sorted by difference between revenue growth and inventory growth.
1. Harman International Industries Inc. (HAR): Engages in the development, manufacture and marketing of audio products and electronic systems primarily in the United States, Germany and other parts of Europe. Market cap of $3.02B. The stock has gained 11.70% over the past quarter. MRQ revenue has increased 25.53% ($1,050.6M vs. $836.95M y/y) while MRQ inventory has increased 10.27% ($484.32M vs. $439.21M y/y). Inventory/current assets has decreased from 24.46% to 23.49%, comparing three months ending 2011-09-30 to three months ending 2010-09-30. This is a risky stock that is significantly more volatile than the overall market (beta = 2.18). The stock has had a good month, gaining 51.28%.
2. CMS Energy Corp. (CMS): Operates as an energy company primarily in Michigan. Market cap of $5.28B. The stock has gained 11.22% over the past quarter. MRQ revenue has increased 1.79% ($1,364M vs. $1,340M y/y) while MRQ inventory has decreased 10.03% ($969M vs. $1,077M y/y). Inventory/current assets has decreased from 41.09% to 32.78%, comparing three months ending 2011-06-30 to three months ending 2010-06-30. The stock has gained 19.31% over the last year.
3. Genuine Parts Company (GPC): Distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Puerto Rico, Canada and Mexico. Market cap of $9.0B. The stock has gained 13.63% over the past quarter. MRQ revenue has increased 11.35% ($3,285.56M vs. $2,950.56M y/y) while MRQ inventory has increased 3.11% ($2,250.31M vs. $2,182.41M y/y). Inventory/current assets has decreased from 49.70% to 48.43%, comparing three months ending 2011-09-30 to three months ending 2010-09-30. The stock has had a good month, gaining 13.05%.
4. Whole Foods Market, Inc. (WFM): Engages in the ownership and operation of natural and organic food supermarkets. Market cap of $12.78B. The stock has gained 13.57% over the past quarter. MRQ revenue has increased 10.94% ($2,399.78M vs. $2,163.18M y/y) while MRQ inventory has increased 4.42% ($348.29M vs. $333.55M y/y). Inventory/current assets has decreased from 29.72% to 26.46%, comparing 12 weeks ending 2011-07-03 to 12 weeks ending 2010-07-04. The stock has had a good month, gaining 10.43%.
5. Jabil Circuit Inc. (JBL): Provides electronic manufacturing services and solutions in the Americas, Europe and Asia. Market cap of $4.28B. The stock has gained 23.78% over the past quarter. MRQ revenue has increased 10.86% ($4,280.3M vs. $3,860.93M y/y) while MRQ inventory has increased 6.36% ($2,227.34M vs. $2,094.14M y/y). Inventory/current assets has decreased from 45.0% to 43.37%, comparing three months ending 2011-08-31 to 3 months ending 2010-08-31. The stock has had a good month, gaining 15.57%.
6. Molex Inc. (MOLX): Manufactures and sells electronic components worldwide. Market cap of $4.34B. The stock has gained 11.72% over the past quarter. MRQ revenue has increased 4.27% ($935.99M vs. $897.67M y/y) while MRQ inventory has increased 0.07% ($547.21M vs. $546.81M y/y). Inventory/current assets has decreased from 29.54% to 26.42%, comparing three months ending 2011-09-30 to three months ending 2010-09-30. Offers a good dividend, and appears to have good liquidity to back it up - dividend yield at 3.24%, current ratio at 2.24, and quick ratio at 1.64. The stock has had a couple of great days, gaining 5.38% over the last week.
*Accounting data sourced from Google Finance, all other data sourced from Finviz.
