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Technology Stocks : American Power Conversion
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To: jas cooper who wrote (1420)6/4/1997 1:33:00 AM
From: Ken   of 2574
 
Looking for some fundamental analysis on APCC ...

I ran some #'s on APCC from last quarter's financials. My biggest concern is why there is so much capital tied up in inventory and receivables with respect to sales. I calculate that it takes APCC $1.55 in capital (Inventory + Receivables) to generate $1.00 of sales. At the end of last year about $160 million was tied up in I + R with about $700 million in revenues. Thus, capital productivity is quite low here. APCC is vulnerable to inventory pricing. APCC might have increased inventory going into the last quarter because of favorable prices. This is reflected in the fact that COGS grew at 15% last quarter while revs grew at 21%. I would be interested in APCC's inventory turnover. To put the $1.55 tied up in capital into proper perspective, consider that it takes Gateway, Dell, and Intel only about $0.12, $0.16, and $0.25 in I + R to generate $1.00 of sales, respectively. This is productivity and is the result of effective inventory mgmt and efficient manufacturing. Since APCC has low capital productivity, I do not find it a compelling investment. Computer/network hardware peripheral companies need to be as productive as possible because of potential price declines in built-up inventories. I welcome comments.
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