Momentum Ideas: 10 Stocks With Encouraging Inventory Trends

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(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Accounting data sourced from Google Finance, all other data sourced from Finviz.)

Are you looking for companies that are exhibiting healthy accounting behavior? One approach is to look into inventory trends – doing so provides an interesting insight into the health of a company’s sales trends.

Strong Inventory Trends

To explore this idea we ran a screen on stocks with positive trends in inventory, indicated by growth in quarterly revenue outpacing growth in quarterly inventory year-over-year. We also screened for companies with quarterly inventory decreasing as a percent of current assets.

To  understand why these trends are encouraging, think of why the opposite trends would be discouraging. If revenue were growing slower than inventory, it could indicate that the company is having trouble selling its inventory – although it may just indicate inventory building or a change in sales policies.

Momentum

To increase the quality of this screen, we also screened for companies reaching new 52-week highs.

The idea of this “new high” screen is that the stocks are exhibiting upward momentum. Investors can try to capitalize on the existing trend and the momentum behind it.

The List

Do you think these momentum plays have strong sales? Use this list as a starting point for your own analysis.

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1. DXP Enterprises Inc. (DXPE): Distributes maintenance, repair, and operating products (mro), equipment, and services to industrial customers in the US. Revenue grew by 20.67% during the most recent quarter ($207.85M vs. $172.25M y/y). Inventory grew by 11.63% during the same time period ($79.11M vs. $70.87M y/y). Inventory, as a percentage of current assets, decreased from 38.82% to 37.82% during the most recent quarter (comparing 3 months ending 2011-09-30 to 3 months ending 2010-09-30).

2. Chart Industries Inc. (GTLS): Chart Industries, Inc. manufactures and supplies engineered equipment used in the production, storage, and end-use of hydrocarbon and industrial gases in the United States and internationally. Revenue grew by 51.79% during the most recent quarter ($211.31M vs. $139.21M y/y). Inventory grew by 41.52% during the same time period ($135.73M vs. $95.91M y/y). Inventory, as a percentage of current assets, decreased from 22.67% to 19.45% during the most recent quarter (comparing 3 months ending 2011-09-30 to 3 months ending 2010-09-30).

3. The Home Depot, Inc. (HD): Operates as a home improvement retailer. Revenue grew by 4.23% during the most recent quarter ($20,232M vs. $19,410M y/y). Inventory grew by -0.03% during the same time period ($10,756M vs. $10,759M y/y). Inventory, as a percentage of current assets, decreased from 68.28% to 67.83% during the most recent quarter (comparing 13 weeks ending 2011-07-31 to 13 weeks ending 2010-08-01).

4. Hi Tech Pharmacal Co. Inc. (HITK): Develops, manufactures, markets, and sells generic, prescription, over-the-counter (OTC), and nutritional products in liquid and semisolid dosage forms in the United States. Revenue grew by 42.99% during the most recent quarter ($56.21M vs. $39.31M y/y). Inventory grew by 14.84% during the same time period ($27.7M vs. $24.12M y/y). Inventory, as a percentage of current assets, decreased from 20.48% to 16.71% during the most recent quarter (comparing 3 months ending 2011-07-31 to 3 months ending 2010-07-31).

5. Jaguar Mining Inc. (JAG): Engages in the production of gold, as well as in the acquisition, exploration, development, and operation of gold mineral properties in Brazil. Revenue grew by 64.34% during the most recent quarter ($60.56M vs. $36.85M y/y). Inventory grew by -21.49% during the same time period ($30.98M vs. $39.46M y/y). Inventory, as a percentage of current assets, decreased from 32.16% to 15.98% during the most recent quarter (comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30).

6. Lancaster Colony Corporation (LANC): Engages in the manufacture and marketing of consumer products focusing primarily on specialty foods for the retail and foodservice markets in the United States. Revenue grew by 3.57% during the most recent quarter ($274.52M vs. $265.05M y/y). Inventory grew by -16.01% during the same time period ($110.25M vs. $131.26M y/y). Inventory, as a percentage of current assets, decreased from 40.09% to 32.08% during the most recent quarter (comparing 3 months ending 2011-09-30 to 3 months ending 2010-09-30).

7. Oceaneering International, Inc. (OII): Provides engineered products and services primarily to the offshore oil and gas industry with a focus on deepwater applications. Revenue grew by 16.65% during the most recent quarter ($602.21M vs. $516.27M y/y). Inventory grew by 6.94% during the same time period ($259.32M vs. $242.5M y/y). Inventory, as a percentage of current assets, decreased from 26.94% to 25.94% during the most recent quarter (comparing 3 months ending 2011-09-30 to 3 months ending 2010-09-30).

8. Philip Morris International, Inc. (PM): Engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Revenue grew by 22.26% during the most recent quarter ($20,706M vs. $16,936M y/y). Inventory grew by -9.64% during the same time period ($7,453M vs. $8,248M y/y). Inventory, as a percentage of current assets, decreased from 53.27% to 49.39% during the most recent quarter (comparing 3 months ending 2011-09-30 to 3 months ending 2010-09-30).

9. Vectren Corporation (VVC): Provides energy delivery services to residential, commercial, and industrial and other customers in Indiana and west central Ohio. Revenue grew by 27.61% during the most recent quarter ($539.4M vs. $422.7M y/y). Inventory grew by 10.09% during the same time period ($207.3M vs. $188.3M y/y). Inventory, as a percentage of current assets, decreased from 37.2% to 33.3% during the most recent quarter (comparing 3 months ending 2011-09-30 to 3 months ending 2010-09-30). 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets


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