Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Does Best Buy Co., Inc. (BBY)’s Stock Live Up to Its Name?

Costco Wholesale Corporation (NASDAQ:COST) has its own select product lines, but much of its business centers on selling high volumes of products to customers at prices that are only possible by selling in bulk. Costco’s revenues have been rock-solid, maintaining a growth rate of around 10% for the past two years. Accordingly, for Costco to maintain healthy margins, it must have a high rate of inventory turnover, and it’s done just that. Costco’s inventory turnover is cyclical, but it retains a predictable and healthy pattern.

In the past, my research has incorporated a Motley Fool Earnings Quality score, or EQ, that taps into a database that ranks individual stocks. The database designates an “A” through “F” weekly ranking, based on price, cash flow, revenue, and relative strength, among other things. Stocks with poor earnings quality tend to underperform, so we look for trends that might predict future outcomes.

Stock Current Price July 17, 2012, Price % Increase / Decrease EQ Score
Best Buy $28.50 $18.8 36.1% B
Amazon $308.70 $216.9 29.7% F
Costco $117 $96 21.9% F

All three stocks have performed well in the past year. Even though Best Buy Co., Inc. (NYSE:BBY) has struggled to grow its revenues, the stock has climbed with the market and has been the best performer of the bunch. Part of the reason it has such a higher EQ over, Inc. (NASDAQ:AMZN) or Costco Wholesale Corporation (NASDAQ:COST) is that expectations were so low that any acceleration in the fundamental trends were likely to lead to outsized stock-price performance.

If management can execute its “Renew Blue” plan effectively, then Best Buy Co., Inc. (NYSE:BBY) stock could continue to climb as the company finds even greater success.

The article Does Best Buy’s Stock Live Up to Its Name? originally appeared on and is written by John Del Vecchio.

Fool contributor John Del Vecchio, CFA, is the co-manager of the Ranger Equity Bear ETF and index provider to the Forensic Accounting ETF. He is also co-author of the book What’s Behind the Numbers? with fellow Fool Tom Jacobs. He has no position in any stocks mentioned. The Motley Fool recommends and owns shares of and Costco Wholesale.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.