Monster Beverage Corp. (NASDAQ:MNST)

The analysis of the financial turnover ratios and related periods over five years reveals several notable trends impacting the company’s operational efficiency and cash flow management.

Inventory Turnover and Processing Period

The inventory turnover ratio declined from 4.66 in 2019 to 3.44 in 2023, reaching a low of 3.35 in 2022. Correspondingly, the average inventory processing period increased substantially from 78 days in 2019 to a peak of 109 days in 2022, slightly improving to 106 days in 2023. This suggests a slowing rate of inventory movement and longer holding periods, potentially indicating challenges in inventory management or changes in demand patterns.

Receivables Turnover and Collection Period

Receivables turnover experienced a steady decline from 7.77 in 2019 to 5.98 in 2023, with minor stabilization between 2021 and 2022. This trend parallels an increase in the average receivable collection period from 47 days to 61 days over the same timeframe. The extension in collection duration may imply leniency in credit terms or greater difficulty in collecting receivables, affecting liquidity.

Payables Turnover and Payment Period

Payables turnover showed fluctuations, beginning at 6.14 in 2019, rising to 7.06 in 2022, then falling to 5.93 in 2023. The average payables payment period fluctuated as well, ranging between 52 and 62 days without a consistent trend. The peak payment period occurred in 2023, which may reflect strategic extension of payment terms or delays in settling obligations, thereby impacting cash flow timing.

Working Capital Turnover

Working capital turnover declined notably from 2.54 in 2019 to 1.61 in 2023, hitting its lowest point at 1.49 in 2021. This decline suggests decreased efficiency in generating revenue from working capital, potentially indicating increased capital tied up in operations or less efficient use of current assets and liabilities.

Operating and Cash Conversion Cycles

The operating cycle lengthened from 125 days in 2019 to 167 days in 2023, with a peak of 168 days in 2022. Similarly, the cash conversion cycle extended from 66 days to 105 days over the same period, peaking at 116 days in 2022 before slight improvement. These increases reflect a combined effect of slower inventory turnover, longer receivable collection, and varied payment periods, resulting in delayed conversion of investments in inventory and receivables into cash.

In summary, the company has seen a general deceleration in asset turnover ratios, accompanied by longer operational and cash conversion cycles. This indicates inefficiencies emerging over the period analyzed, with increased days tied in inventory and receivables alongside less efficient use of working capital. The variations in payables turnover and payment periods suggest adjustments in payment strategies but insufficient to offset the lengthening cash conversion cycle. Overall, these trends highlight potential areas for improvement in inventory, receivables management, and overall working capital optimization to enhance liquidity and operational efficiency.

Cost of Sales

The cost of sales has demonstrated a consistent upward trend over the five-year period analyzed. Starting at approximately $1.68 billion in 2019, it increased annually, reaching about $3.35 billion by 2023. This represents nearly a doubling of cost of sales, indicating escalating production or procurement expenses.

Inventories

Inventory levels show notable growth over the years. From around $361 million in 2019, inventories rose to approximately $971 million in 2023. The increase was particularly sharp between 2020 and 2022, suggesting either expansion in stock holdings or accumulation due to other operational factors.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a declining pattern from 2019 to 2022, moving from 4.66 down to 3.35, before a slight increase to 3.44 in 2023. This decline implies that inventory was being sold or used more slowly relative to the stock held, potentially indicating longer holding periods or slower sales velocity. The minor uptick in 2023 may reflect attempts to improve turnover efficiency.

Net Sales

There was a consistent upward trend in net sales over the five-year period. Starting from approximately $4.2 billion in 2019, net sales increased steadily each year, reaching about $7.14 billion in 2023. This represents a compound growth trajectory, indicating expanding revenue generation capacity.

Accounts Receivable, Net

The net accounts receivable balance also exhibited continuous growth throughout the period. Beginning at roughly $540 million in 2019, it rose each year, culminating near $1.19 billion in 2023. This growth in receivables aligns with the increase in net sales, though the proportionate increase appears relatively higher.

Receivables Turnover Ratio

The receivables turnover ratio showed a declining trend from 7.77 times in 2019 down to 5.98 times in 2023. This ratio measures how effectively the company is managing its credit sales and collections. The decrease suggests a lengthening in the average collection period or slower turnover of receivables, indicating that accounts receivable are being held for longer durations despite the growth in sales.

Overall Analysis

The data reveals strong revenue growth paired with an increasing balance of accounts receivable. However, the declining receivables turnover ratio signals potential challenges in collection efficiency or a strategic lengthening of customer payment terms. Monitoring the implications on cash flow as receivables grow is advisable to ensure that working capital management remains effective amidst expanding sales.

The financial data reveals several key trends related to cost of sales, accounts payable, and payables turnover over the five-year period from 2019 to 2023.

Cost of Sales

The cost of sales has demonstrated a consistent upward trajectory throughout the period. Starting at approximately $1.68 billion in 2019, it increased steadily to $1.87 billion in 2020, followed by a more notable jump to $2.43 billion in 2021. This growth continued with a further significant rise in 2022 to about $3.14 billion, and then a moderated increase to around $3.35 billion in 2023. Overall, the cost of sales nearly doubled over the five years, indicating rising production or procurement costs or increased sales volume.

Accounts Payable

Accounts payable similarly exhibited consistent growth across the period. Starting at approximately $274 million in 2019, the figure increased to nearly $297 million in 2020. The upward trend became more pronounced with payables reaching over $404 million in 2021 and further rising to $444 million in 2022. The most substantial growth occurred in 2023 with payables rising sharply to about $564 million. This pattern suggests an increasing use of credit from suppliers or growth in purchasing activities.

Payables Turnover

The payables turnover ratio exhibited fluctuations without a clear linear trend. Beginning at 6.14 in 2019, it slightly increased to 6.32 in 2020 but then declined to 6.02 in 2021. A notable peak occurred in 2022, with the turnover ratio rising to 7.06, which indicates faster payment of payables in that year. However, this trend reversed in 2023 when the ratio dropped to its lowest point in the period, 5.93, suggesting a slower rate of payment relative to purchases and potentially extended payment cycles.

In summary, the company’s cost of sales and accounts payable both have shown strong upward trends over the five years, consistent with growth in business operations or cost pressures. However, the payables turnover ratio presents variability, with a peak in 2022 followed by a decline in 2023, indicating changing payment practices or liquidity management strategies in different years.

The financial data reveals several key trends over the five-year period ending December 31, 2023.

Working Capital

There is a consistent upward trend in working capital, which grew from approximately $1.66 billion in 2019 to about $4.43 billion in 2023. This represents a significant increase more than doubling the initial amount. The growth indicates an expansion in the company's short-term assets relative to its short-term liabilities, potentially improving liquidity and operational efficiency.

Net Sales

Net sales show a steady and substantial increase throughout the period. Starting at around $4.20 billion in 2019, net sales rose each year, reaching over $7.14 billion in 2023. This growth demonstrates strong revenue generation and possibly expanding market share or successful product acceptance in the market.

Working Capital Turnover

The working capital turnover ratio exhibits some fluctuations over the years but generally displays a declining trend from 2.54 in 2019 to 1.61 in 2023. Despite slight recovery in 2022, the ratio remains lower than the initial year. This decline suggests that the company generates fewer sales dollars per dollar of working capital over time, which could imply that working capital is increasing at a faster rate than sales or that there is less efficient use of working capital resources.

Overall, while the company shows strong increases in both working capital and net sales, the reduction in working capital turnover ratio may warrant further analysis to understand the causes of declining capital efficiency relative to sales growth. The growth in working capital alongside robust sales expansion represents financial strength, but the lower turnover ratio highlights potential areas for improving capital utilization.

The financial data reveals notable shifts in inventory management efficiency over the analyzed periods. A clear downward trend is observed in the inventory turnover ratio from 2019 through 2023, with a temporary increase in 2020. Specifically, the ratio peaked at 5.63 in 2020 before declining to a low of 3.35 in 2022 and slightly recovering to 3.44 in 2023.

This decline in inventory turnover ratio indicates that the company is selling and replacing its inventory less frequently over time after 2020. Concurrently, the average inventory processing period, measured in days, increased substantially from 2019 to 2022, rising from 78 days to 109 days, with a marginal decrease to 106 days in 2023.

The inverse relationship between these two metrics is consistent with typical inventory management dynamics: as the turnover ratio decreases, the average duration inventory remains on hand increases. The rise in days inventory outstanding suggests a slowdown in inventory movement or an accumulation of stock, which may have implications for cash flow management, storage costs, and potential obsolescence risk.

In summary, the data indicates a trend toward slower inventory turnover and extended inventory holding periods starting after 2020, which may require further investigation into operational and market factors influencing inventory management efficiency in the recent years.

The financial data reveals a declining trend in the receivables turnover ratio over the five-year period. The ratio decreased from 7.77 in 2019 to 5.98 in 2023, indicating that the company is collecting its receivables less frequently each year.

Correspondingly, the average receivable collection period, measured in number of days, shows a consistent increase. It rose from 47 days in 2019 to 61 days in 2023, suggesting that the company is taking longer to collect payments from its customers.

Receivables Turnover Ratio

Downward trend from 7.77 (2019) to 5.98 (2023)

Indicates a slower turnover of receivables

Average Receivable Collection Period

Upward trend from 47 days (2019) to 61 days (2023)

Reflects an increase in the time taken to collect receivables

The inverse relationship between these two metrics suggests a weakening in the efficiency of the company's credit and collection processes. This trend may impact the company's liquidity and working capital management if it persists, as longer collection periods can constrain cash flow.

The financial data reveals a consistent pattern of lengthening periods in the company's inventory processing and receivable collection activities over the reviewed years. This results in an overall increase in the operating cycle, indicating changes in working capital management and operational efficiency.

Average Inventory Processing Period

There is a noticeable increase in the average inventory processing period from 78 days in 2019 to 106 days in 2023. The period decreased slightly in 2020 to 65 days but subsequently rose to a peak of 109 days in 2022 before experiencing a slight reduction in 2023. This trend suggests that the company is holding inventory longer on average, which could imply either challenges in inventory turnover or a strategic decision to maintain higher inventory levels.

Average Receivable Collection Period

The average receivable collection period has progressively lengthened from 47 days in 2019 to 61 days in 2023. The increase is steady over the five years, reflecting a potential shift in credit terms or customer payment behaviors, possibly indicating a more extended duration for cash inflows related to receivables.

Operating Cycle

The operating cycle has expanded significantly, rising from 125 days in 2019 to 167 days in 2023. After a small reduction in 2020, the cycle lengthened considerably, peaking at 168 days in 2022 before a marginal decrease. The lengthening operating cycle indicates a slower conversion of resources into cash, which could affect liquidity and working capital requirements.

Overall, these trends suggest increasing time frames for both inventory management and receivables collection, resulting in a longer operating cycle that may require closer monitoring of cash flow and working capital strategies to sustain operational efficiency.

Payables Turnover

The payables turnover ratio exhibits moderate fluctuations over the analyzed period. It started at 6.14 in 2019 and showed a slight increase to 6.32 in 2020. This was followed by a decrease to 6.02 in 2021. The ratio then increased noticeably to 7.06 in 2022 before declining again to 5.93 in 2023. Overall, the data indicates variability in how quickly payables are being settled, with the highest efficiency observed in 2022 and the lowest in 2023.

Average Payables Payment Period

The average payables payment period, measured in days, generally mirrors the trends observed in the payables turnover ratio but in the opposite direction, as expected. The period decreased slightly from 59 days in 2019 to 58 days in 2020, then increased to 61 days in 2021. A significant reduction occurred in 2022, bringing the payment period to its shortest duration of 52 days. However, in 2023, the period rose to its longest duration of 62 days. This indicates variability in the time taken to pay suppliers, with the fastest payments made in 2022 and the slowest in 2023.

Overall Observation

The inverse relationship between payables turnover and payment period is consistent throughout the period. The increases in turnover ratio correlate with reductions in payment period and vice versa. 2022 stands out as a year where both payables turnover was highest and payment periods were shortest, suggesting improved efficiency in managing payables. Conversely, 2023 shows a reversal of this trend with reduced turnover and increased payment periods, indicating a slower settlement process compared to previous years.

Average Inventory Processing Period

The average inventory processing period exhibited variability over the analyzed years. It decreased from 78 days in 2019 to 65 days in 2020, indicating a more efficient inventory turnover in that year. However, from 2020 onwards, there was a notable increase, reaching 89 days in 2021 and peaking at 109 days in 2022, before slightly declining to 106 days in 2023. This upward trend after 2020 may suggest slower inventory movement or potential buildup of stock.

Average Receivable Collection Period

This period showed a steady upward trend throughout the timeframe. Starting at 47 days in 2019, it increased consistently each year to 53 days in 2020, 59 days in 2021, remained stable at 59 days in 2022, and then rose slightly to 61 days in 2023. This suggests a gradual lengthening of the time taken to collect receivables, which might impact short-term liquidity.

Average Payables Payment Period

The average payables payment period was relatively stable but with some fluctuations. It slightly declined from 59 days in 2019 to 58 days in 2020, then increased to 61 days in 2021. In 2022, there was a notable decrease to 52 days, followed by a rise to 62 days in 2023. These variations indicate fluctuating payment practices, with a significant delay in payments in 2023 compared to 2022.

Cash Conversion Cycle

The cash conversion cycle demonstrated an overall increasing trend, reflecting the combined impact of inventory processing, receivables, and payables periods. It decreased marginally from 66 days in 2019 to 60 days in 2020, suggesting improved operational efficiency. However, it then increased significantly to 87 days in 2021 and further to a peak of 116 days in 2022, before decreasing slightly to 105 days in 2023. This overall lengthening of the cash conversion cycle indicates a longer duration for the company to convert its investments in inventory and other resources into cash inflows.