There’s no foolproof way to know the future for HB Fuller (NYS: FUL) or any other company. However, certain clues may help you see potential stumbles before they happen — and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company’s current health and future prospects. It’s an important step in separating the pretenders from the market’s best stocks. Alone, AR — the amount of money owed the company — and DSO — the number of days’ worth of sales owed to the company — don’t tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can, at times, suggest a desperate company that’s trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like HB Fuller do this? For the same reason any other company might: to make the numbers. Investors don’t like revenue shortfalls, and employees don’t like reporting them to their superiors.

Is HB Fuller sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I’ve plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. HB Fuller’s latest average DSO stands at 59.6 days, and the end-of-quarter figure is 58.5 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let’s get back to our original question: Based on DSO and sales, does HB Fuller look like it might miss its numbers in the next quarter or two?

I don’t think so. AR and DSO look healthy. For the last fully reported fiscal quarter, HB Fuller’s year-over-year revenue …read more

Source: FULL ARTICLE at DailyFinance

There’s no foolproof way to know the future for Crane (NYS: CR) or any other company. However, certain clues may help you see potential stumbles before they happen — and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company’s current health and future prospects. It’s an important step in separating the pretenders from the market’s best stocks. Alone, AR — the amount of money owed the company — and DSO — the number of days’ worth of sales owed to the company — don’t tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can, at times, suggest a desperate company that’s trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like Crane do this? For the same reason any other company might: to make the numbers. Investors don’t like revenue shortfalls, and employees don’t like reporting them to their superiors.

Is Crane sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I’ve plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. Crane’s latest average DSO stands at 53.8 days, and the end-of-quarter figure is 48.7 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let’s get back to our original question: Based on DSO and sales, does Crane look like it might miss its numbers in the next quarter or two?

I don’t think so. AR and DSO look healthy. For the last fully reported fiscal quarter, Crane’s year-over-year revenue grew 1.6%, and its AR dropped …read more

Source: FULL ARTICLE at DailyFinance

There’s no foolproof way to know the future for Compuware (NAS: CPWR) or any other company. However, certain clues may help you see potential stumbles before they happen — and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company’s current health and future prospects. It’s an important step in separating the pretenders from the market’s best stocks. Alone, AR — the amount of money owed the company — and DSO — the number of days’ worth of sales owed to the company — don’t tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can, at times, suggest a desperate company that’s trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like Compuware do this? For the same reason any other company might: to make the numbers. Investors don’t like revenue shortfalls, and employees don’t like reporting them to their superiors.

Is Compuware sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I’ve plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. Compuware’s latest average DSO stands at 145.4 days, and the end-of-quarter figure is 160.5 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let’s get back to our original question: Based on DSO and sales, does Compuware look like it might miss its numbers in the next quarter or two?

The numbers don’t paint a clear picture. For the last fully reported fiscal quarter, Compuware’s year-over-year revenue grew 1.9%, and its AR dropped 4.4%. That …read more

Source: FULL ARTICLE at DailyFinance

There’s no foolproof way to know the future for PetroLogistics (NYS: PDH) or any other company. However, certain clues may help you see potential stumbles before they happen — and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company’s current health and future prospects. It’s an important step in separating the pretenders from the market’s best stocks. Alone, AR — the amount of money owed the company — and DSO — the number of days’ worth of sales owed to the company — don’t tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can, at times, suggest a desperate company that’s trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like PetroLogistics do this? For the same reason any other company might: to make the numbers. Investors don’t like revenue shortfalls, and employees don’t like reporting them to their superiors.

Is PetroLogistics sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I’ve plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. PetroLogistics’s latest average DSO stands at 47.7 days, and the end-of-quarter figure is 47.3 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let’s get back to our original question: Based on DSO and sales, does PetroLogistics look like it might miss its numbers in the next quarter or two?

The numbers don’t paint a clear picture. For the last fully reported fiscal quarter, PetroLogistics’s year-over-year revenue grew 14.6%, and its AR grew 101.7%. That’s …read more

Source: FULL ARTICLE at DailyFinance