Institutions Are Buying 5 Consumer Goods Stocks With Encouraging Inventory Trends

Consumer goods companies that decrease inventory before the holiday season can be suspect. Are they forecasting lower demand for products in the pipeline? Selling off old models before ramping up? Or did they simply have great sales the past quarter that are going to continue? These are just a few of the questions to ask when analyzing the stocks in this list; All have increased inventory turnover backing up boosted revenues.

To be specific, stocks below have faster growth in revenue than inventory over the last year. Since inventory represents the portion of goods not yet sold, faster growth in revenue than inventory is considered an encouraging sign.

The caveat is that institutions are getting into to these stocks. LeapFrog (LF) could be experiencing a spike in demand for its award-winning LeapPad2 . Under Armour (UA) and Hanesbrands (HBI) are both apparel brands that may be discounting their inventory and feeling pressure from input costs. Of course, discounting and inventory write-offs may be from a prior inventory build-up combined with better sales. Movado (MOV) has seen increased demand for watches but it’s also shut down many retail outlets.

The List:

Institutions were eager to buy up these products, everything from auto parts to watches, as revenues increased ahead of inventory across the board. Are these stocks being undervalued? Overvalued?

Use this list as a starting point for your own analysis.

The average 1-year return of this list? 77%.

1. Dorman Products, Inc. (DORM, Earnings, Analysts, Financials): Dorman Products, Inc. supplies original equipment dealer automotive replacement parts, and fasteners and service line products primarily for the automotive aftermarket. Market cap at $1.11B, most recent closing price at $30.59. Revenue grew by 13.56% during the most recent quarter ($144.17M vs. $126.96M y/y). Inventory grew by 5.64% during the same time period ($137.29M vs. $129.96M y/y). Inventory, as a percentage of current assets, decreased from 45.27% to 39.32% during the most recent quarter (comparing 13 weeks ending 2012-06-30 to 13 weeks ending 2011-06-25).

2. Hanesbrands Inc. (HBI, Earnings, Analysts, Financials): Engages in the design, manufacture, sourcing, and sale of apparel essentials in the United States and internationally. Market cap at $3.2B, most recent closing price at $32.81. Revenue grew by 1.08% during the most recent quarter ($1,180.65M vs. $1,167.99M y/y). Inventory grew by -12.46% during the same time period ($1,435.85M vs. $1,640.23M y/y). Inventory, as a percentage of current assets, decreased from 65.56% to 63.66% during the most recent quarter (comparing 13 weeks ending 2012-06-30 to 13 weeks ending 2011-07-02).

3. LeapFrog Enterprises Inc. (LF, Earnings, Analysts, Financials): Provides technology-based learning platforms worldwide. Market cap at $563.64M, most recent closing price at $8.39. Revenue grew by 31.35% during the most recent quarter ($71.48M vs. $54.42M y/y). Inventory grew by -16.96% during the same time period ($52.65M vs. $63.4M y/y). Inventory, as a percentage of current assets, decreased from 35.% to 21.82% during the most recent quarter (comparing 3 months ending 2012-06-30 to 3 months ending 2011-06-30).

4. Movado Group, Inc. (MOV, Earnings, Analysts, Financials): Designs, sources, markets, and distributes fine watches and jewelry. Market cap at $813.6M, most recent closing price at $32.35. Revenue grew by 4.24% during the most recent quarter ($118.03M vs. $113.23M y/y). Inventory grew by -13.33% during the same time period ($170.41M vs. $196.61M y/y). Inventory, as a percentage of current assets, decreased from 45.99% to 41.65% during the most recent quarter (comparing 3 months ending 2012-07-31 to 3 months ending 2011-07-31).

5. Under Armour, Inc. (UA, Earnings, Analysts, Financials): Designs, develops, markets, and distributes a range of apparel and accessories using synthetic microfiber fabrications in the U. Market cap at $5.85B, most recent closing price at $55.98. Revenue grew by 26.82% during the most recent quarter ($369.47M vs. $291.34M y/y). Inventory grew by 22.45% during the same time period ($380.89M vs. $311.07M y/y). Inventory, as a percentage of current assets, decreased from 50.07% to 49.% during the most recent quarter (comparing 3 months ending 2012-06-30 to 3 months ending 2011-06-30).