Is the current inventory situation at Baxter International (NYSE: BAX ) out of line? To figure that out, start by comparing the company's inventory growth to sales growth. How is Baxter International doing by this quick checkup? At first glance, not so great. Trailing-12-month revenue increased 1.7%, and inventory increased 8.0%. Comparing the latest quarter to the prior-year quarter, the story looks potentially problematic. Revenue contracted 0.1%, and inventory grew 8.0%. Over the sequential quarterly period, the trend looks OK but not great. Revenue dropped 2.7%, and inventory grew 3.7%.

Let's dig into the inventory specifics. On a trailing-12-month basis, raw materials inventory was the fastest-growing segment, up 18.1%. On a sequential-quarter basis, work-in-progress inventory was the fastest-growing segment, up 8.0%. Although Baxter International shows inventory growth that outpaces revenue growth, the company may also display positive inventory divergence, suggesting that management sees increased demand on the horizon.

Source: Motley Fool

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