A company may brag that sales are up 10 percent, but if inventories are up 30 percent, you have to say to yourself: “Wait a second. Maybe they should have marked that stuff down and gotten rid of it. Since they didn’t get rid of it, they might have a problem next year, and a bigger problem the year after that. The new stuff they make will compete with the old stuff, and inventories will pile up even higher until they’re forced to cut prices, and that means less profit.”
