7 Stocks with Strong Inventory Trends and High ROI

7 Stocks with Strong Inventory Trends and High ROI

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Earlier this week we looked at consumer confidence in the US, which hit new highs already this month. But this morning, Bloomberg reports that the Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell from a six-year-high overall, just over the course of a few weeks. Despite job growth and recovering stock portfolios and retirement funds, higher interest rates, particularly for home mortgages, is making Americans more wary of spending their money. This news comes after a tough week for the Dow Jones Industrial Average, and disappointing earnings reports from several major retailers. 

If Americans really are buying less, that could be a bad sign for companies across multiple industries. That's why we decided to run a screen for stocks traded in the US that posted positive inventory trends in the most recent quarter. 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 indicate negative trends such as 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 suggests 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, like changes in company policy. To narrow our field even further, we looked for lucrative investments by screening for stocks with a return on investment (ROI) of at least 15%. We were left with seven stocks on our list. 

Click on the interactive chart below to see analyst ratings over time. 

Do you consider inventory trends when making investment choices? Use the list below as a starting point for your own analysis. 

1. AmerisourceBergen Corporation (ABC, Earnings, Analysts, Financials): Provides drug distribution and related services to healthcare providers and pharmaceutical manufacturers in the United States, the United Kingdom, and Canada. Market cap at $13.41B, most recent closing price at $58.03.

Revenue grew by 13.35% during the most recent quarter ($21,906.65M vs. $19,326.81M y/y). Inventory grew by 8.22% during the same time period ($5,895.09M vs. $5,447.13M y/y). Inventory, as a percentage of current assets, decreased from 48.76% to 48.56% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

ROI: 20.4%

 

2. Bally Technologies, Inc. (BYI, Earnings, Analysts, Financials): Designs, manufactures, operates, and distributes advanced technology-based gaming devices, systems, and server-based solutions worldwide. Market cap at $3.02B, most recent closing price at $74.62.

Revenue grew by 13.39% during the most recent quarter ($259.15M vs. $228.54M y/y). Inventory grew by -19.54% during the same time period ($65.75M vs. $81.72M y/y). Inventory, as a percentage of current assets, decreased from 17.62% to 13.21% during the most recent quarter (comparing 3 months ending 2013-03-31 to 3 months ending 2012-03-31).

ROI: 16.4%

 

3. The Home Depot, Inc. (HD, Earnings, Analysts, Financials): Operates as a home improvement retailer. Market cap at $113.68B, most recent closing price at $77.44.

Revenue grew by 7.39% during the most recent quarter ($19,124M vs. $17,808M y/y). Inventory grew by 2.1% during the same time period ($11,825M vs. $11,582M y/y). Inventory, as a percentage of current assets, decreased from 66.75% to 63.51% during the most recent quarter (comparing 13 weeks ending 2013-05-05 to 13 weeks ending 2012-04-29).

ROI: 17.8%

 

4. Medifast Inc. (MED, Earnings, Analysts, Financials): Engages in the production, distribution, and sale of weight management and disease management products, and other consumable health and diet products in the United States. Market cap at $361.41M, most recent closing price at $26.07.

Revenue grew by 3.74% during the most recent quarter ($97.07M vs. $93.57M y/y). Inventory grew by -1.78% during the same time period ($15.98M vs. $16.27M y/y). Inventory, as a percentage of current assets, decreased from 20.47% to 15.79% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

ROI: 15.5%

 

5. Tim Hortons Inc. (THI, Earnings, Analysts, Financials): Develops, franchises, and operates quick service restaurants primarily in Canada and the United States. Market cap at $8.92B, most recent closing price at $58.68.

Revenue grew by 1.85% during the most recent quarter ($800.14M vs. $785.58M y/y). Inventory grew by -16.12% during the same time period ($99.61M vs. $118.75M y/y). Inventory, as a percentage of current assets, decreased from 22.76% to 18.41% during the most recent quarter (comparing 13 weeks ending 2013-06-30 to 13 weeks ending 2012-07-01).

ROI: 24.8%

 

6. Union Pacific Corporation (UNP, Earnings, Analysts, Financials): Provides rail transportation services in North America. Market cap at $73.79B, most recent closing price at $158.59.

Revenue grew by 4.77% during the most recent quarter ($5,470M vs. $5,221M y/y). Inventory grew by 1.24% during the same time period ($654M vs. $646M y/y). Inventory, as a percentage of current assets, decreased from 16.33% to 14.4% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

ROI: 15.1%

 

7. Urban Outfitters Inc. (URBN, Earnings, Analysts, Financials): Operates lifestyle specialty retail stores under the Urban Outfitters, Anthropologie, Free People, Terrain, Leifsdottir, and BHLDN brands. Market cap at $5.96B, most recent closing price at $40.77. Market cap at $5.96B, most recent closing price at $40.77.

Revenue grew by 13.93% during the most recent quarter ($648.18M vs. $568.93M y/y). Inventory grew by 8.58% during the same time period ($325.47M vs. $299.75M y/y). Inventory, as a percentage of current assets, decreased from 44.35% to 34.1% during the most recent quarter (comparing 3 months ending 2013-04-30 to 3 months ending 2012-04-30).

ROI: 17.4%

 

 

(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, accounting data sourced from Google Finance, all other data sourced from Finviz.)

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