Vulcan's Little Secret
June 24, 2011 – Investor web site The Motley Fool is taking a close look at Vulcan Materials, and they noticed something interesting. At first glance, the company looks to be struggling. Trailing-12-month revenue decreased 1.2 percent, and inventory increased 7 percent. In sequential quarterly reports, revenue dropped 16.9 percent, and inventory grew 2.9 percent. But there's something lurking beneath the surface.
There's one type of inventory bulge that is a key indicator. A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. "As such, we might consider oversized growth in those categories to offer a clue to a brighter future. We call it positive inventory divergence," Motley Fool said. "Although Vulcan Materials shows inventory growth that outpaces revenue growth, the company may also display positive inventory divergence, suggesting that management sees increased demand on the horizon." Hmmmmmm. Interesting.
Published: Friday, 24 June 2011 14:50
Written by Mark Kuhar
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