Most investors seem to be concerned with the quality of CHSE's
earnings. One sure way to predict earnings shortfalls is to look at
the relationship between sales growth and inventory and A/R growth.
Simply put, if inventory and A/R are growing at a faster rate than
sales, there could be trouble ahead. Lets look at CHSE's numbers:
FY (ending Dec31)
1995 1996 1997 Ann. Growth
Sales 936,703 1,855,540 4,756,383 125%
A/R 112,501 340,098 659,757 142%
Invent 102,159 321,770 693,503 160%
The numbers were not good during this period. The stock has suffered
and is way off of its 52week highs.
Now look at the most recent quarter ending 3/31/98:
Sales growth (seq): + 63%
Inventory growth - 9%
A/R growth + 7%
Not bad. Now one quarter does not qualify as a trend, but it does
serve notice that CHSE was able to grow WITHOUT the benefit of
stuffing inventory or giving better terms to its customers. (As it may
have been guilty of doing for the previous two years.)
Comments welcome. |
