Tech Ideas: 10 Semiconductor Stocks with Positive Inventory Trends

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(Written by Alexander Crawford. Revenue and inventory data sourced from Google Finance.)

Semiconductors are used in microprocessor chips, transistors, and even solar cells to transmit electrical conductivity. Their material is essentially the foundation of modern technology, and many companies in the tech sector work to support and develop its many applications.

We wanted to analyze these companies to find those with the most encouraging sales trends over the last year. We did this by comparing quarterly inventory growth to revenue growth year-over-year.

Inventory can represent two things: the company’s expectation of what they will soon sell, and also what the company has not yet sold. Therefore, a growing inventory by itself can mean a more positive sales outlook, or the inability to sell products.

But when compared with revenue growth, changes in inventory paint a clearer picture. If inventory grows faster than revenue, it probably indicates that the company is having trouble selling its inventory. If inventory grows slower, it may indicate that the company is selling even more than they anticipated.

Of course, other explanations can exist such as changes in company policy.

We screened the tech sector for stocks in the semiconductor sub-industry. Looking at approx. 150 semiconductors, we compared changes in quarterly inventory y/y to changes in quarterly revenue.

To screen for the companies with the most encouraging sales trends, we found growth in quarterly revenue out-pacing growth in inventory, as well as inventory becoming a smaller portion of current assets.

Below we list the top 10 stocks based on the difference between revenue growth and changes in inventory.

Do you think these semiconductors are selling well? Use this list as a starting point for your own analysis.

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1. MRV Communications Inc. (MRVC): Provides optical communications network infrastructure equipment and services to telecommunications operators, municipalities, cable multiple system operators, corporate and consumer Internet service providers, and data storage and cloud computing providers worldwide. Market cap of $207.48M. MRQ revenue has increased 19.23% ($68.2M vs. $57.2M y/y) while MRQ inventory has decreased 49.75% ($40.99M vs. $81.57M y/y). Inventory/current assets has decreased from 26.12% to 14.45%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30

2. NVIDIA Corporation (NVDA): Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. Market cap of $9.35B. MRQ revenue has increased 25.31% ($1,016.52M vs. $811.21M y/y) while MRQ inventory has decreased 16.65% ($361.91M vs. $434.23M y/y). Inventory/current assets has decreased from 16.35% to 10.91%, comparing 13 weeks ending 2011-07-31 to 13 weeks ending 2010-08-01

3. OmniVision Technologies Inc. (OVTI): Designs, develops, and markets semiconductor image-sensor devices. Market cap of $949.59M. MRQ revenue has increased 42.99% ($276.07M vs. $193.07M y/y) while MRQ inventory has increased 2.01% ($143.79M vs. $140.96M y/y). Inventory/current assets has decreased from 23.78% to 17.84%, comparing 3 months ending 2011-07-31 to 3 months ending 2010-07-31

4. Brooks Automation Inc. (BRKS): Provides automation, vacuum, and instrumentation solutions primarily to the semiconductor manufacturing industry worldwide. Market cap of $626.91M. MRQ revenue has increased 18.72% ($186.14M vs. $156.79M y/y) while MRQ inventory has decreased 19.99% ($93.53M vs. $116.9M y/y). Inventory/current assets has decreased from 38.20% to 24.30%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30

5. Microsemi Corp. (MSCC): Engages in the design, manufacture, and marketing of analog and mixed-signal integrated circuits (IC) and semiconductors primarily in the United States, as well as in Europe and Asia. Market cap of $1.55B. MRQ revenue has increased 59.33% ($216.72M vs. $136.02M y/y) while MRQ inventory has increased 22.88% ($145.35M vs. $118.29M y/y). Inventory/current assets has decreased from 29.11% to 27.13%, comparing 13 weeks ending 2011-07-03 to 13 weeks ending 2010-06-27

6. RDA Microelectronics, Inc. (RDA): Designs, develops, and markets radio-frequency and mixed-signal semiconductors for cellular, broadcast, and connectivity applications. Market cap of $365.72M. MRQ revenue has increased 66.88% ($67.42M vs. $40.4M y/y) while MRQ inventory has increased 34.47% ($40.26M vs. $29.94M y/y). Inventory/current assets has decreased from 40.64% to 20.54%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30

7. NetLogic Microsystems Inc. (NETL): Engages in the design, development, and sale of processors and integrated circuits. Market cap of $3.36B. MRQ revenue has increased 9.14% ($103.69M vs. $95.01M y/y) while MRQ inventory has decreased 20.68% ($37.17M vs. $46.86M y/y). Inventory/current assets has decreased from 15.72% to 11.74%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30

8. Yingli Green Energy Holding Co. Ltd. (YGE): Engages in the design, development, manufacture, marketing, sale, and installation of photovoltaic (PV) products in the People's Republic of China and internationally. Market cap of $616.94M. MRQ revenue has increased 62.94% ($4,398.8M vs. $2,699.62M y/y) while MRQ inventory has increased 36.83% ($2,556.14M vs. $1,868.12M y/y). Inventory/current assets has decreased from 21.85% to 18.03%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30

9. ASML Holding NV (ASML): Engages in designing, manufacturing, marketing, and servicing semiconductor processing equipment used in the fabrication of integrated circuits. Market cap of $17.37B. MRQ revenue has increased 24.02% ($1,458.5M vs. $1,176M y/y) while MRQ inventory has increased 0.41% ($1,455.8M vs. $1,449.8M y/y). Inventory/current assets has decreased from 33.34% to 25.99%, comparing 3 months ending 2011-09-25 to 3 months ending 2010-09-26

10. Cymer Inc. (CYMI): Engages in the development, manufacture, and marketing of excimer light sources for the manufacturers of photolithography tools in the semiconductor equipment industry. Market cap of $1.39B. MRQ revenue has increased 20.01% ($158.24M vs. $131.86M y/y) while MRQ inventory has increased 7.81% ($218.82M vs. $202.97M y/y). Inventory/current assets has decreased from 37.68% to 31.80%, comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30. 



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 , Technology


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