There's a wealth of information in company financial statements, and it's only accessible to investors willing to look through the numbers. Here we give some ideas on how to dig deeper into a company's sales trends by comparing numbers on a company's financial sheets. Doing this can provide some valuable info.
We began by screening the clean energy industry for stocks exhibiting negative signs, or "red flags," in their sales trends, comparing growth in revenue to growth in inventory and accounts receivable.
Generally speaking, it is considered healthier if a company's revenue grows faster than its inventory and accounts receivable. Since inventory is goods not sold, a growing inventory is considered a sign of difficulty selling the company's products. Also, accounts receivable is the portion of revenue that is not yet paid, and because there's no guarantee it will ever be paid, the smaller receivables is the better.
So to illustrate these concepts, we looked through clean energy companies to find those seeing negative sales trends: growth in revenue lagging growth in inventory and accounts receivable year-over-year, as well as inventory and accounts receivable becoming a larger portion of current assets over this time period.
Interactive Chart: Press Play to compare changes in market cap over the last two years for stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these companies are in hot water? Use this list as a starting point for your own analysis.
1. First Solar, Inc. (FSLR): Manufactures and sells solar modules using a thin-film semiconductor technology. Market cap at $2.17B.Price at $24.61. Revenue grew by 8.29% during the most recent quarter ($660.35M vs. $609.8M y/y). Accounts receivable grew by 174.89% during the same time period ($843.97M vs. $307.02M y/y). Receivables, as a percentage of current assets, increased from 19.38% to 32.3% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31). Inventory grew by 164.24% during the same time period ($529.65M vs. $200.44M y/y). Inventory, as a percentage of current assets, increased from 12.65% to 20.27% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31).
2. Maxwell Technologies Inc. (MXWL): Develops, manufactures, and markets energy storage and power delivery products, and microelectronic products. Market cap at $517.09M.Price at $17.93. Revenue grew by 24.13% during the most recent quarter ($42.49M vs. $34.23M y/y). Accounts receivable grew by 33.12% during the same time period ($36.13M vs. $27.14M y/y). Receivables, as a percentage of current assets, increased from 27.99% to 37.72% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31). Inventory grew by 41.16% during the same time period ($27.23M vs. $19.29M y/y). Inventory, as a percentage of current assets, increased from 19.89% to 28.43% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31).
3. Newpark Resources Inc. (NR): Provide fluids management, waste disposal, and well site preparation products and services primarily to the oil and gas exploration and production industry. Market cap at $751.35M.Price at $8.29. Revenue grew by 35.46% during the most recent quarter ($263.51M vs. $194.53M y/y). Accounts receivable grew by 66.97% during the same time period ($328.59M vs. $196.8M y/y). Receivables, as a percentage of current assets, increased from 44.67% to 59.33% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31). Inventory grew by 43% during the same time period ($175.93M vs. $123.03M y/y). Inventory, as a percentage of current assets, increased from 27.93% to 31.77% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31).
*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.
