Micron Technology Inc. (NASDAQ:MU)

The analysis of financial efficiency ratios over the observed periods reveals notable trends in inventory management, receivables collection, and overall operational efficiency.

Inventory Turnover

The inventory turnover ratio initially increased from 2.74 to a peak of 3.85 by the third quarter of 2021, indicative of improved inventory management and faster stock movement. Thereafter, the ratio declined steadily, reaching a low of 1.91 in the final quarter of 2022. This decline suggests a slowdown in inventory turnover, potentially pointing to either overstocking or reduced sales velocity. From early 2023 onwards, a gradual recovery is observed with the ratio rising back to 2.69 by mid-2025, indicating moderate improvements in inventory efficiency.

Receivables Turnover

Receivables turnover showed significant volatility. After an initial rise to 7.01 in early 2021, it fluctuated and generally trended downward from a high of 10.12 in the first quarter of 2023, declining to 4.03 by mid-2025. This decreasing trend suggests a lengthening of the collection period and potential deterioration in credit management or customer payment behavior.

Working Capital Turnover

The working capital turnover ratio exhibited a slight increase from 2.04 to a peak of 2.17 in late 2021, followed by a steady decline to a low of 0.94 by late 2023. This indicates reduced efficiency in utilizing working capital to generate sales during this period. However, a recovery trend is visible from early 2024 onwards, with the ratio improving to 2.15 by mid-2025, pointing toward enhanced operational effectiveness and better asset management.

Average Inventory Processing Period

The average inventory processing period shortened from 133 days to a minimum of 95 days in the third quarter of 2021, reflecting more efficient inventory turnover. Subsequently, this period lengthened significantly to 192 days by the end of 2022, confirming the slowdown observed in inventory turnover ratios. From early 2023, a gradual reduction in days is apparent, improving to 136 days by mid-2025, suggesting restored control over inventory levels and rotation.

Average Receivable Collection Period

The collection period initially decreased from 61 days to 52 days in the first quarter of 2021 but then fluctuated with a rising trend, reaching up to 96 days by mid-2024. This lengthening collection period corroborates the decline in receivables turnover and may indicate increased credit risk or slower customer payments. A slight decrease follows toward mid-2025, though the period remains elevated relative to the early years.

Operating Cycle

The operating cycle, which combines inventory and receivable periods, shortened markedly from 194 days to 158 days during early 2021, reflecting overall improvements in operational efficiency. Thereafter, it lengthened considerably to 262 days by mid-2024, driven primarily by longer inventory processing and receivables collection periods. A moderate improvement is noted towards mid-2025 with the operating cycle reducing to 226 days, indicating some recovery in the company's operational processes.

Overall, the data depicts a period of strengthened operational efficiency and asset management in early 2021, followed by a phase of deterioration characterized by slower inventory turnover, extended collection periods, and elongated operating cycles. Emerging improvements in recent quarters imply initiatives to enhance working capital utilization and operational responsiveness are beginning to take effect.

Cost of Goods Sold (COGS)

The cost of goods sold exhibited notable fluctuations over the observed periods. Initially, from December 2020 to March 2021, there was an increase from approximately $4,037 million to $4,587 million. This was followed by a moderate decline through the rest of 2021, reaching a low of roughly $3,192 million in December 2022. However, starting in early 2023, COGS gradually increased, peaking at about $6,261 million by August 2025. This upward trend in the latter periods indicates rising production or procurement costs possibly associated with increased sales volume, inflationary pressures, or changes in product mix.

Inventories

Inventory levels varied significantly throughout the analyzed timeframe. Initially, inventory decreased from $5,521 million in December 2020 to a low of around $4,487 million in September 2021. Afterward, it began a consistent upward trajectory, reaching a peak near $8,359 million in December 2022. Following this peak, inventory levels stabilized and fluctuated modestly, remaining in the range of approximately $8,355 million to $8,875 million through to August 2024, before slightly declining to about $8,355 million by August 2025. This pattern suggests initial inventory reduction potentially aligned with improving turnover or supply chain adjustments, followed by accumulation indicative of increased production, stockpiling, or potential overstocking concerns.

Inventory Turnover

The inventory turnover ratio, which measures how often inventory is sold and replaced over a period, showed an overall decreasing trend initially. Starting at 2.74 in December 2020, it peaked at 3.85 by September 2021 before declining significantly to a trough of 1.91 in December 2022. Post this low, the turnover ratio gradually improved, rising to 2.69 by August 2025. The initial increase suggests more efficient inventory management or stronger sales relative to inventory, whereas the subsequent decline points to slower inventory movement, possibly due to higher inventory levels or softening demand. The recent modest recovery indicates some improvements in inventory management or sales efficiency.

Overall Analysis

The data indicates a dynamic inventory and cost environment over the observed quarters. The early periods were characterized by increasing production costs and decreasing inventory levels, which could reflect cautious inventory management or supply constraints. In contrast, the latter periods show both rising costs and inventory buildups, signaling potential shifts in operational strategy, market conditions, or demand forecasts. The fluctuation in inventory turnover aligns with these trends, highlighting varying effectiveness in turning inventory into sales. Moving forward, the company might need to balance inventory growth with turnover efficiency to optimize working capital and reduce carrying costs.

Revenue Trends

The revenue exhibited a generally positive trend over the periods analyzed, with fluctuations. Starting at 5,773 million USD, it increased steadily to a peak of 8,274 million USD by September 2021. Subsequently, a decline occurred through December 2022, marking a low point of 4,085 million USD. From March 2023 onward, revenue demonstrated a sustained recovery and growth phase, reaching 11,315 million USD by August 2025. This indicates a cyclical pattern with a trough around late 2022 followed by a marked upward trajectory into 2025.

Receivables Trends

Receivables followed a somewhat parallel pattern with revenue but with lagging and more pronounced volatility. Initially, receivables stood at 3,691 million USD and rose to a peak of 6,229 million USD by June 2022. Thereafter, a decrease was observed, dipping to 2,278 million USD by March 2023, aligning with the revenue trough. Following this low, receivables again increased, reaching 9,265 million USD by August 2025, indicating that receivables grew more sharply than revenue in the latter part of the period.

Receivables Turnover Ratio

The receivables turnover ratio, indicating efficiency in collection, showed notable fluctuations. It began at 5.98, peaking at 7.01 in March 2021, then declining steadily to a low of 3.8 in November 2024. A slight recovery followed toward August 2025. The declining turnover ratio during 2022-2024 suggests slower collection relative to sales during that period, coinciding with fluctuations in revenue and receivables. The slight improvement in the final periods could indicate efforts to enhance collection efficiency.

Overall Analysis

The data reveals cyclical behavior in both revenue and receivables, with a notable sales peak in 2021, a subsequent decline through 2022 to early 2023, and a strong recovery thereafter. Receivables increased disproportionately in the later stages relative to revenue, which, combined with the declining turnover ratio, signals potential challenges in receivables collection efficiency or changes in credit terms during that time. The recent uptick in turnover ratio may reflect management's response to these challenges. Monitoring these trends will be important to assess liquidity and operational efficiency in future periods.

Working Capital Trends

The working capital exhibited a generally upward trajectory across the analyzed periods, starting from $10,841 million and eventually reaching $17,387 million by the latest period. There were fluctuations within the timeline, including a peak around mid-2022 followed by a decline towards early 2023, then a renewed increase beginning in early 2024. This pattern indicates periodic adjustments in current assets and liabilities, possibly reflective of operational changes or shifts in short-term financial management strategies.

Revenue Movement

Revenue demonstrated significant volatility, peaking multiple times and showing a cyclical nature. It began at $5,773 million and increased notably to a high point at $8,274 million within a year, then declined sharply to $3,693 million around early 2023, marking a substantial contraction. Following this dip, revenue steadily recovered and expanded to $11,315 million by the end of the reported timeframe. This recovery phase suggests a rebound or growth in sales activity and possibly market demand or product expansion.

Working Capital Turnover Analysis

The working capital turnover ratio, which relates revenue generation to working capital investment, initially was relatively stable around 2.0 but saw a pronounced decline starting late 2022 to below 1.0 by mid-2023, signaling reduced efficiency in using working capital to generate sales. Subsequently, this ratio improved steadily from early 2024 onward, climbing back toward 2.15, aligning with the revenue increase and signaling enhanced operational efficiency and better utilization of short-term assets relative to sales.

Overall Observations

The periods of reduced revenue and working capital turnover ratio between late 2022 and mid-2023 correlate with a phase of lower operational efficiency and possibly tightened market conditions or internal challenges. The recovery in revenue alongside increased working capital levels and improved turnover towards the latter periods reveals a positive turnaround, underpinning a rebuilding phase with potentially more effective management of working capital and improved sales performance.

Inventory Turnover Trend

The inventory turnover ratio demonstrated an initial upward trend from December 2020 (2.74) reaching a peak in September 2021 (3.85). However, following this peak, the ratio steadily declined, touching a low point in December 2022 (1.91). From that point onward, the turnover ratio began a gradual recovery, increasing to 2.69 by August 2025. This pattern indicates a period of improved efficiency in inventory management until late 2021, followed by a phase of reduced inventory movement speed, then slight improvement toward the end of the observed period.

Average Inventory Processing Period Trend

The average inventory processing period, measured in days, inversely mirrored the inventory turnover ratio. It decreased from 133 days in December 2020 to a minimum of 95 days in September 2021, indicating faster inventory processing during that time. Subsequently, the processing period extended significantly, peaking at 192 days in December 2022, reflecting slower inventory movement. After this peak, the processing period gradually shortened, reaching 136 days by August 2025. This suggests an initial improvement followed by a period of inventory accumulation or slower turnover, then a gradual return to more efficient processing durations.

Overall Analysis

Throughout the period examined, there is a clear cyclical pattern in inventory management efficiency. The earlier part of the timeline shows improving inventory turnover and decreasing average processing days, signaling effective operational performance. This switches around late 2021 and into 2022, with inventory turnover declining and processing days increasing, potentially indicating supply chain challenges, demand changes, or strategic inventory buildup. The latter part of the period reveals a gradual recovery in inventory turnover and a reduction in processing days, reflecting efforts to optimize inventory levels and operations. The trends suggest management responses aimed at regaining inventory efficiency after a period of slowdown.

Receivables Turnover Ratio

The receivables turnover ratio exhibits variability over the observed periods, beginning at 5.98 and increasing to a peak of 10.12 before experiencing a general decline towards 4.03. Initial fluctuations show moderate stability around 5 to 6, followed by a sharp improvement indicating more efficient collection processes, especially noticeable in early 2023. However, subsequent quarters reveal a downward trend, suggesting decreasing efficiency in converting receivables into cash as the ratio diminishes steadily toward levels similar to those at the start of the observed timeline.

Average Receivable Collection Period

The average receivable collection period inversely correlates with the receivables turnover ratio, ranging initially from 61 days and showing significant decrease to 36 days at its best point. After this period, there is a distinct escalation in collection days, peaking at 96 days before gradually tapering off towards 90 days by the latest quarter. This indicates that the company initially improved its collection cycle, reducing the time to convert receivables into cash, but over the latter periods, collection times increased substantially, implying potential challenges or changes in credit terms or customer payment behavior.

Overall Analysis

The data indicate a period of improvement in accounts receivable management during early 2023, characterized by higher turnover and shorter average collection periods, suggesting enhanced liquidity and operational efficiency. However, from mid-2023 onward, the trends reverse, with turnover ratios declining and collection periods extending, signaling possible difficulties in receivables management or shifts in business conditions affecting customer payments. This deterioration could impact cash flow and should warrant further investigation and potentially corrective measures.

Inventory Processing Period

The average inventory processing period exhibited variability over the analyzed quarters. Initially, it decreased from 133 days to 95 days within the first year, indicating improved efficiency in inventory management. However, starting in late 2021, the period lengthened substantially, peaking at 192 days in December 2022. Following this peak, there was a gradual decline, with the period reduced to 136 days by August 2025, though it remained above early 2021 levels. This pattern suggests initial supply chain optimization followed by challenges or strategic changes leading to longer inventory holding times before a partial recovery.

Receivable Collection Period

The average receivable collection period showed notable fluctuations throughout the timeframe. It began at 61 days, decreased to a low of 36 days by March 2023, indicating enhanced credit and collection policies or faster customer payments. Subsequently, the period increased steadily to reach 96 days by August 2024, before a slight decline to 90 days by August 2025. The rise after early 2023 could imply loosening credit terms, changes in customer payment behavior, or challenges in collections that impacted liquidity.

Operating Cycle

The operating cycle, combining inventory processing and receivable collection periods, reflected the combined trends of its components. It initially decreased from 194 days to approximately 158-166 days through early 2021, then experienced a general upward trend peaking around 262 days in February 2024. After this peak, it decreased moderately to 226 days by August 2025. This suggests that despite some improvements in parts of the cycle, overall efficiency was affected by the extended inventory and receivables periods in the later years. The operating cycle demonstrates sensitivity to changes in both inventory management and receivables collection practices over the period analyzed.