Express Scripts Holding Co. (NASDAQ:ESRX)

Inventory turnover

The inventory turnover ratio exhibits some fluctuation over the observed periods. Beginning at 51.29, it generally remains in the range of approximately 43.99 to 57.16, indicating variability in how efficiently inventory is managed across quarters. There is a slight downward trend towards the later periods, with the ratio decreasing to around 39.97 by the last quarter, suggesting a gradual reduction in inventory turnover efficiency.

Receivables turnover

This ratio shows a downward trend throughout the period, starting from a high of 25.88 and declining to 12.95 by the most recent quarter. The steady decrease implies that the company is collecting receivables more slowly over time, which could indicate a lengthening credit period or challenges in receivables management.

Payables turnover

The payables turnover ratio decreases from 33.09 initially to 20.94 at the end of the observed periods. This decline suggests the company is taking longer to pay its suppliers on average, potentially improving cash retention but possibly affecting supplier relationships.

Average inventory processing period

The average inventory processing period remains relatively stable, fluctuating primarily between 6 and 9 days. This consistency points to steady inventory handling times without significant changes in operational efficiency related to inventory management.

Average receivable collection period

There is an observable increase in the average receivable collection period, starting at 14 days and rising to 28 days in the later quarters. This elongation means the company requires more time to collect payments from customers, aligning with the downward trend seen in the receivables turnover ratio.

Operating cycle

The operating cycle, representing the sum of inventory processing and receivables collection periods, shows an increase from 21 days to about 37 days over the period. This change indicates that the business cycle from acquiring inventory to collecting cash is lengthening, which could affect liquidity.

Average payables payment period

The average payables payment period extends from 11 days up to 19 days, reflecting the trend seen in the payables turnover ratio. The company appears to be extending the time it takes to pay creditors, possibly as a working capital management strategy.

Cash conversion cycle

The cash conversion cycle demonstrates some variability, moving from 10 days up to 20 days throughout the periods. While remaining positive, the overall trend toward a longer cash conversion cycle suggests that the time between cash outflow and inflow is increasing, which could have implications on the company’s liquidity and cash management.

The cost of revenues exhibits a fluctuating pattern over the quarterly periods analyzed, without a clear long-term upward or downward trajectory. Initially, values hover near 24 billion US dollars, with some declines observed around early 2014, followed by a marginal recovery and subsequent fluctuations around the 23 billion mark towards the end of the observed period. This suggests variations in expenses related to the cost of goods sold or services rendered that do not consistently trend in one direction but vary within a certain range.

Inventories show a general upward trend over the period, despite some oscillations. Beginning at approximately 1.66 billion US dollars, inventory levels increase gradually, reaching over 2.2 billion in some of the later quarters. The increases in inventory levels may indicate either stockpiling due to anticipated demand, slower turnover, or changes in inventory management practices. Some quarters show notable jumps, such as in the final quarter of 2014 and in mid to late 2018, which might reflect seasonal variations or strategic inventory adjustments.

Inventory turnover ratios indicate variability throughout the analyzed timeframe, with values ranging from about 40 to over 57. The highest ratios around 57 suggest periods of relatively rapid inventory movement, while the lower values near 40 indicate slower turnover. There is no consistent trend of increasing or decreasing turnover, but the overall pattern suggests periods of both efficient and less efficient inventory management. Notable dips in inventory turnover often correspond to periods where inventories increase or cost of revenues fluctuate, implying that changes in inventory levels impact the turnover rate. The turnover ratios tend to decline somewhat in the later periods, possibly indicating slower inventory movement towards the end of the dataset.

The revenue figures demonstrate a fluctuating yet generally stable pattern over the observed periods. Initially, revenues ranged near the 26 billion USD mark in 2013, followed by a decline in early 2014, dropping to approximately 23.7 billion USD at March 31, 2014. Subsequently, a recovery is visible as revenues climbed back to above 26 billion USD by the end of 2014. From 2015 through 2018, revenues oscillated around the mid-24 to mid-25 billion USD range without a clear upward or downward trend, indicating relative stability but with some periodic variations.

Net receivables revealed a somewhat increasing trend during the same timeframe. Beginning with approximately 4.3 billion USD in early 2013, net receivables increased moderately with some fluctuations, reaching around 7.8 billion USD by the third quarter of 2018. Notably, there is a pronounced jump in net receivables between the first quarter of 2014 and the last quarter of 2014, where values escalated from roughly 3.9 billion USD to nearly 6 billion USD, suggesting changes in credit policies, collection efficiency, or business operations affecting accounts receivable.

The receivables turnover ratio, available from the first quarter of 2014 onward, shows a declining trend indicating slower collection of receivables relative to sales over time. The ratio started at about 25.88, maintaining a similar level early in 2014 but then dropped sharply to 19.41 by the second quarter of 2014 and continued to decline further, reaching levels around 13 to 15 by 2018. This decreasing turnover suggests that the company experienced slower cash conversion cycles and may have extended credit terms or faced challenges in collecting outstanding receivables efficiently in recent periods.

Revenue Trend

Revenues showed overall stability with fluctuations around 24 to 26 billion USD across the periods, without a strong upward or downward trajectory post-2014.

Net Receivables

Net receivables increased from approximately 4.3 billion USD in early 2013 to nearly 7.8 billion USD by late 2018, indicating growth in credit sales or slower collection.

Receivables Turnover

The turnover ratio declined significantly from about 26 in early 2014 to below 14 by 2018, reflecting slower receivables collection and potentially less efficient working capital management.

Interpretation

The combination of stable revenues with increasing net receivables and declining turnover suggests that while sales volumes remained steady, the ability to efficiently convert receivables into cash diminished, possibly impacting liquidity and cash flow dynamics.

The cost of revenues demonstrates fluctuations across the observed quarters but generally shows a moderate declining trend from early 2013 to early 2018. Initial values around 24,057,800 thousand USD in Q1 2013 slightly decrease by the end of 2016, with some recovery and minor volatility noted in subsequent quarters. The lowest cost points appear in Q4 2016 with 22,525,100 thousand USD, and values slightly increase afterward, stabilizing around 23,200,000 thousand USD by late 2018.

Accounts payable figures show a clear upward trend throughout the period. Beginning at 2,573,700 thousand USD in Q1 2013, this figure reaches a peak of 4,793,500 thousand USD by mid-2018. The increasing trend is consistent with some periodic fluctuations, notably a significant rise starting in early 2016 through mid-2017 before some stabilization and variability in late 2017 and 2018.

Payables turnover ratios, available from mid-2013 onwards, reveal a downward trend through the time observed. Starting around 33.09 in Q2 2013, it declines steadily to approximately 19.12 by Q3 2017, indicating an elongation in the payment cycle, meaning the company was taking longer to pay its suppliers over the years. Minor reversals and fluctuations occur, but the overall direction suggests a gradual increase in days payable outstanding.

Summary of Trends

The cost of revenues slightly decreases over the years but remains relatively stable with minor seasonal and quarterly fluctuations.

Accounts payable increase markedly, more than doubling from 2013 to 2018, suggesting extended credit terms or increased purchases on account.

Payables turnover ratio declines, indicating the company is paying its suppliers less frequently or taking longer to settle payables compared to earlier periods.

The combination of stable to moderately decreasing costs and growing accounts payable implies changes in cash management or supplier payment strategies over the observed timeframe.

The analysis of the quarterly financial data reveals several notable trends and patterns over the time period considered.

Working Capital

The working capital values are consistently negative throughout the entire period, indicating that current liabilities exceed current assets in each quarter. Initially, the negative working capital shows a gradual increase in magnitude from -2,816,200 thousand USD as of March 31, 2013, to -6,448,800 thousand USD by December 31, 2014. This suggests a growing imbalance between current assets and liabilities over this span.

Following this peak in negative working capital, there is some fluctuation: a decline in the negative balance to -4,065,700 thousand USD by December 31, 2016, representing an improvement; however, this trend reverses again, with the negative working capital increasing in the subsequent quarters and reaching around -5,889,300 thousand USD by December 31, 2017. The figure improves somewhat towards -4,339,200 thousand USD by September 30, 2018. Overall, working capital exhibits volatility but remains significantly negative, indicating persistent liquidity pressure.

Revenues

Revenues demonstrate relative stability with minor fluctuations across the quarters. Starting at 26,019,900 thousand USD in March 2013, revenues fluctuate between approximately 23,685,000 thousand USD and 26,579,000 thousand USD during the observed period. A notable dip is observed around the first quarter of 2014, with revenues decreasing to the lowest point of 23,685,000 thousand USD.

Subsequently, revenues show a moderate recovery, generally trending near or slightly above 25,000,000 thousand USD in most quarters, with some variation. The data does not indicate any sharp growth or decline, but rather a stable revenue base with some quarter-to-quarter variation typical of seasonal or market factors.

Working Capital Turnover

There are no values reported for working capital turnover. This absence of data means no analysis can be performed on how efficiently the company is using its working capital to generate revenues.

General Observations

The persistent negative working capital, coupled with stable revenues, suggests the company may be relying on short-term liabilities to finance its operations or facing challenges in current asset management. The improvements and deteriorations over the years point to fluctuating liquidity conditions but no clear sustainable trend toward positive working capital.

Given the stable revenue stream and ongoing negative working capital, it would be appropriate to further investigate the underlying causes of the working capital deficit and review the company's short-term financial strategies to enhance liquidity and operational efficiency.

The inventory turnover ratio displays variability across the observed periods starting from March 31, 2014. Initially, the ratio was 51.29 and experienced a moderate increase reaching 54.33 by June 30, 2014. Subsequently, it slightly decreased to 52.45 in September 2014 and maintained a similar level of 51.66 by December 2014. Entering 2015, the ratio declined to 43.99 as of March, before recovering progressively over the remaining quarters, peaking at 57.16 in September 2015, then slightly decreasing again to 54.12 at year-end. Throughout 2016, the ratio remained relatively stable, fluctuating modestly between 46.14 and 55.48, indicating consistent inventory turnover. In 2017, the ratio displayed a gradual decline from 46.79 in March to 44.3 by September, stabilizing somewhat around 42.97 to 44.3 towards the end of the year. The first three quarters of 2018 highlight a further decline, with turnover ratios dropping from 39.97 in March to 42.62 by September.

The average inventory processing period, expressed in days, has shown a generally consistent pattern from March 31, 2014, through September 30, 2018. The period predominantly hovered around 7 days, with occasional increments to 8 days in several quarters and a slight increase to 9 days in the last two quarters covered by the data. This suggests a relatively stable timeframe for inventory processing, with minor extensions observed towards the end of the period analyzed.

Inventory Turnover Ratio

This ratio exhibits fluctuations that may reflect changes in inventory management efficiency or sales volume. The initial increases, followed by declines and peaks, suggest periods of both enhanced and reduced inventory movement. The peak in September 2015 is notable, while the downward trend into 2018 could indicate slower inventory turnover, potentially pointing to inventory accumulation or reduced sales pace.

Average Inventory Processing Period

The stability in the average number of days for inventory processing suggests consistent operational processes. Slight increases towards the end of the timeline may indicate minor delays or changes in inventory handling but remain within a narrow range, maintaining operational efficiency.

The analysis of the quarterly financial data reveals a notable trend in both receivables turnover and average receivable collection period over the observed periods. Initially, receivables turnover exhibited relatively high ratios around 25.88 and 26.04; however, a marked decline commenced in the following quarters, culminating in lower values, including 13.69 and 12.95 in later periods. This decline suggests a decreasing frequency of receivables being collected within the financial year.

Correspondingly, the average receivable collection period reflected an opposite movement by increasing steadily from approximately 14 days at the beginning to a peak of around 28 days in the concluding period. This indicates that the duration needed to collect receivables lengthened progressively, suggesting slower collection processes or extended credit terms over time.

Receivables Turnover

Started at high levels around 25.88 to 26.04 and then dropped significantly to levels near 13 by the end of the series.

The steady decline implies reduced efficiency in turning receivables into cash during the covered periods.

Average Receivable Collection Period

Rose gradually from approximately 14 days to a high of about 28 days, reflecting longer durations to collect payments from customers.

This trend could point to deteriorating collection performance or changes in credit policy, potentially affecting the company’s liquidity.

Overall, the trends in these measures indicate a weakening in the company's receivables management, with slower collections and longer outstanding periods, which could impact operational cash flow and working capital management if the pattern continues.

The data reveals several notable trends in the operational efficiency metrics over the analyzed periods.

Average Inventory Processing Period

This metric remained stable at 7 days from March 2014 to December 2014, then exhibited slight variability between 6 and 9 days in subsequent periods. There was a minor upward trend toward the end of the timeline, reaching 9 days in the latest quarters. Overall, the inventory processing period is relatively consistent but shows a modest increase in the latter periods.

Average Receivable Collection Period

The collection period started at 14 days and generally increased over time, with notable fluctuations. It rose sharply from 14 days in early 2014 to peaks around 26-28 days in late 2015 through 2018. This trend indicates a lengthening in the time taken to collect receivables, which could suggest either extended credit terms or delays in cash collection processes.

Operating Cycle

The operating cycle shows an increasing trend, progressing from 21 days in early 2014 to approximately 36-37 days by late 2018. This reflects the combined effect of the rising receivable collection period and the relatively stable inventory processing period. The lengthening operating cycle may highlight growing working capital requirements and potential liquidity management considerations.

In summary, the average inventory processing period remained mostly steady with slight increases, while the average receivable collection period notably lengthened over time. As a result, the overall operating cycle extended by approximately 15-16 days across the dataset, indicating a gradual slowdown in the company's cash conversion efficiency during the period under review.

Payables Turnover Ratio

The payables turnover ratio started at 33.09 in March 2013 and demonstrated a gradual decline over the subsequent years. From 2013 through 2018, the ratio decreased from above 33 to a low of 19.12 in March 2018. This declining trend suggests that the company has been slowing down its rate of payments to suppliers, potentially indicating longer credit terms negotiated or a strategic extension of payment periods to manage cash flow. There were some minor fluctuations in the ratio, but the overall trajectory was distinctly downward over the observed period.

Average Payables Payment Period (Days)

Corresponding with the downward trend in the payables turnover, the average payables payment period increased over time. Initially reported at 11 days in early 2013, the payment period lengthened progressively, reaching 19 days by September 2018. This increase confirms the observation that the company has extended the time it takes to settle payables. The period grew steadily year by year, reflecting a deliberate or operational adaptation to longer payment cycles.

Insight Summary

The inverse relationship between payables turnover ratio and average payment period is consistent with typical financial patterns, where a lower turnover corresponds to a longer payment cycle. The trends indicate a strategic shift or an operational change in the company's accounts payable management, potentially to enhance liquidity or optimize working capital management. This shift may have implications for supplier relationships and credit terms and should be monitored to ensure it does not adversely affect the supply chain or vendor trust.

The analysis of the financial metrics related to the company's operational efficiency over the reported periods reveals several trends and patterns. The metrics examined include the average inventory processing period, average receivable collection period, average payables payment period, and the overall cash conversion cycle.

Average Inventory Processing Period

This period remained relatively stable, fluctuating mostly between 7 and 9 days across the reported quarters. An initial absence of data is noted before March 31, 2014, after which the metric consistently hovers around 7 days, with slight increases to 8 or 9 days in some quarters. This suggests a consistent inventory turnover rate with minor variability over time.

Average Receivable Collection Period

This period shows a gradual increase over time. Starting from 14 days in early 2014, it rises to a range between 25 and 28 days by 2018. Notably, there is a sharp rise from 14 to 23 days between the mid and end of 2013. The increasing trend suggests a lengthening in the time taken to collect receivables, which could imply reduced efficiency in cash collection or potentially relaxed credit terms.

Average Payables Payment Period

The payment period demonstrates a general upward trend. Initially at 11 days, it increases steadily to approximately 17-19 days by late 2018. This indicates that the company is taking longer to pay its suppliers, possibly as a cash management strategy to optimize liquidity or due to renegotiated payment terms.

Cash Conversion Cycle

The cash conversion cycle shows an overall upward pattern, increasing from about 10 days to around 20 days. This trend reflects the combined effects of the increasing receivable collection period and payables payment period, as well as the relatively stable inventory processing period. The lengthening cash conversion cycle indicates that the company takes more time to convert its investments in inventory and other resources into cash flows from sales.

In summary, while inventory management remains stable, the company experiences noticeable elongation in both receivable collection and payable payment periods, resulting in an extended cash conversion cycle over the analyzed periods. This might imply a strategic shift toward slower cash inflows and outflows, impacting liquidity management and working capital efficiency.