AmerisourceBergen Corp. (NYSE:ABC)

Inventory Turnover

The inventory turnover ratio demonstrated a generally increasing trend from the end of 2017 through 2020, peaking at 16.31 in March 2020. After this peak, a gradual decline followed through 2021, reaching about 13.11 in December 2021. Subsequently, there was a moderate recovery with the ratio rising again to the range of approximately 14.1 to 14.58 by mid-2023. This pattern suggests periods of improved inventory management efficiency followed by slight loosening and partial recovery.

Receivables Turnover

Receivables turnover showed a decreasing trend over the entire period. Starting from 15.35 at the end of 2017, it decreased with fluctuations to nearly 12.23 by June 2023. The most notable declines were observed between 2019 and 2021, indicating a lengthening in the time taken to collect receivables, with some modest stabilization but no substantial recovery in recent quarters.

Payables Turnover

The payables turnover ratio remained relatively stable with minor fluctuations, oscillating between approximately 5.59 and 6.22. There was no clear upward or downward trend, suggesting consistent payment practices. Slight dips were noted in some periods, such as between late 2019 and 2021, but these were limited in scope and short-lived.

Average Inventory Processing Period

The average inventory processing period decreased from 29 days at the end of 2017 to lows of 22 to 23 days in early to mid-2019 and again in mid-2022, indicating faster inventory turnover in these periods. Following these lows, the days increased slightly toward 26-28 days during late 2021, before stabilizing around 25-26 days by mid-2023. Overall, inventory processing has become more efficient compared to the earliest periods.

Average Receivable Collection Period

There was a gradual increase in receivables collection days from 24 days at the end of 2017 to around 30 days by mid-2023. The most notable elongation occurred during 2020 and 2021, where collection periods reached the upper 20s to low 30s, suggesting customers took longer to settle accounts during this time. The lengthening of collection periods aligns with the declining receivables turnover ratio, indicating reduced efficiency in cash collection.

Operating Cycle

The operating cycle fluctuated modestly over the period, starting at 53 days and moving between 48 and 60 days across different quarters. There was an observable peak at 60 days during mid-2021, coinciding with longer receivables and inventory cycles. Subsequently, the cycle tightened slightly but remained above early period levels, signifying a slightly extended time to convert inventory and receivables into cash.

Average Payables Payment Period

The average payables payment period generally ranged from 59 to 67 days, with some variability. The highest values occurred around late 2020 and 2021, peaking at 67 days, indicating the company extended payment terms to suppliers during this timeframe. This lengthening of payment periods may have been a strategy to optimize cash flow during periods of operational challenges.

Cash Conversion Cycle

The cash conversion cycle was consistently negative throughout the period, ranging roughly from -6 to -12 days. The negative values indicate the company was able to delay payments to suppliers beyond the time it took to collect receivables and sell inventory. Notably, the most negative values occurred around 2018 and late 2020 with a slight tightening (less negative) towards 2021 and stabilization thereafter, reflecting effective working capital management that minimizes cash tied up in operations.

The analysis of the quarterly financial data reveals several key trends in the cost of goods sold, inventories, and inventory turnover ratios over the examined periods.

Cost of Goods Sold (COGS)

The cost of goods sold demonstrates a general upward trend from late 2017 through mid-2023. Starting at approximately $39.35 billion in December 2017, the figure exhibits fluctuations but consistently grows, reaching around $64.68 billion by June 2023. Notably, there is a sharp increase from mid-2020 onwards, with the COGS rising substantially through 2021 and 2022, suggesting higher sales volume or increased cost pressures. Slight dips are observed around early 2020 and early 2023, but the overall movement remains positive.

Inventories

Inventory levels show variability but generally trend upwards over the period analyzed. Beginning at about $12.02 billion in December 2017, inventories fluctuate moderately during 2018 and 2019 but start to rise more steadily from late 2019 onwards. Inventory peaks appear in late 2021 at approximately $16.29 billion and stabilize somewhat thereafter, maintaining levels around $16.85 billion by mid-2023. The growth in inventories, particularly from 2020 forward, aligns with the increase in COGS, indicating expanded stock holdings likely to support higher sales or anticipate demand.

Inventory Turnover Ratio

The inventory turnover ratio, which measures how efficiently inventory is managed relative to sales, exhibits a dynamic yet cyclic pattern within a narrower range. It starts at 12.55 times in December 2017, rises steadily to reach seasonal peaks above 15.7 times in parts of 2019, and experiences fluctuations around the mid-teens from 2020 onwards. Notably, the turnover ratio declines somewhat during 2021, dropping closer to 13 times, before recovering to mid-14 times levels through 2022 and early 2023. This suggests a period of slightly slower inventory movement in 2021, followed by improved efficiency or increased sales velocity afterwards.

In summary, the data indicates that the company has experienced growing operational scale, reflected in rising cost of goods sold and inventories. Inventory management efficiency as seen in turnover ratios shows typical seasonal variations and a temporary slowdown in 2021, but overall remains stable. These patterns collectively suggest ongoing adjustments to support increased business volume while maintaining effective inventory control.

The financial data reveals several important trends concerning revenue, accounts receivable, and receivables turnover over the examined periods.

Revenue

Revenue generally demonstrates a growing trend from the end of 2017 through mid-2023. Starting at approximately 40.5 billion USD, revenue increases steadily with some fluctuations, reaching nearly 67 billion USD in the second quarter of 2023. The growth is more pronounced from late 2020 onward, with occasional quarterly variations, suggesting robust business expansion and possibly successful market penetration or product sales enhancement.

Accounts Receivable, net of allowances

Accounts receivable values rise alongside revenue, increasing from about 10.1 billion USD at the end of 2017 to roughly 20.8 billion USD in mid-2023. This upward movement reflects the higher sales volume, but the pace of increase in receivables is somewhat proportionate to revenue growth. There are visible peaks and troughs, particularly in the early 2020 period, which may indicate changes in credit policy or payment collection cycles aligning with broader economic conditions.

Receivables Turnover Ratio

The receivables turnover ratio shows a general decline over time, moving from around 15.35 in late 2017 to near 12.23 by mid-2023. This diminishing ratio suggests that, although sales and receivables are growing, the efficiency in collecting outstanding receivables has decreased. It indicates customers are taking longer to pay, or credit terms have been extended, which could impact cash flow and working capital management.

Overall, the data shows strong revenue growth accompanied by rising accounts receivable balances, while the declining receivables turnover highlights a potential area of concern in terms of credit management efficiency. The interplay of these factors should be closely monitored to ensure that sales growth does not lead to overstretched credit exposure or liquidity challenges.

Cost of Goods Sold

Over the observed periods, the cost of goods sold exhibited a general upward trend from US$39.4 billion at the end of 2017 to approximately US$64.7 billion by mid-2023. This increase was relatively steady with some fluctuations, notably a slight decrease in early 2020 followed by a marked rise through 2021 and into 2022. The remainder of the periods show continued growth, indicating increased operational scale or higher input costs.

Accounts Payable

Accounts payable demonstrated a consistent increasing pattern from roughly US$25.3 billion at the end of 2017 to about US$43.8 billion by the middle of 2023. The trajectory suggests expansion in credit purchases or extended payment terms over time. While some quarters showed minor decreases or slower growth, the overall movement reflects larger liabilities balanced against purchasing or inventory strategies.

Payables Turnover Ratio

The payables turnover ratio remained relatively stable between 5.4 and 6.2 across all periods. Minor fluctuations within this range indicate marginal changes in the frequency with which the company settled its accounts payable relative to purchases. There was a slight decline starting late 2019 through to 2021, suggesting slower payment cycles during these terms. Nevertheless, the ratio maintained a steady average, reflecting controlled management of payables despite increasing absolute values.

Overall Insights

The data reveals a consistent growth in both procurement activity and supplier obligations, reflected in increasing cost of goods sold and accounts payable. The steadiness of the payables turnover ratio amidst these increases suggests effective working capital management, balancing growth with supplier payment discipline. Periods of slight ratio decline may correlate with market or operational adjustments, possibly pandemic-related disruptions or strategic supplier negotiations. The sustained upward trajectory in costs and payables points toward scaling operations or inflationary pressures in the supply chain.

Working Capital

The working capital exhibits significant volatility over the analyzed periods, with a predominantly negative balance throughout. Initially, from late 2017 through 2019, negative working capital values fluctuate within a narrower range, moving from approximately -1.44 billion to nearly -1.67 billion US dollars. A notable improvement occurs in early 2020, where the deficit reduces sharply, approaching a less negative figure near -344 million US dollars by the end of 2020. However, this trend reverses starting in early 2021, with working capital deteriorating sharply into more negative territory, peaking below -5 billion US dollars by early 2023. This indicates increasing short-term liquidity pressures or changes in current asset and current liability management over time.

Revenue

Revenue demonstrates a generally upward trajectory with episodic fluctuations. Starting at approximately 40.5 billion US dollars at the close of 2017, revenues increase steadily over the years, reaching around 47.9 billion by the end of 2019. There is a slight dip in the first half of 2020, likely influenced by prevailing market conditions, before rebounding robustly in the latter half of 2020 into 2021. The highest revenue figures are observed towards the end of the series, surpassing 66.9 billion US dollars by mid-2023, reflecting substantial growth in sales volume or pricing power.

Working Capital Turnover

A single data point is available for working capital turnover, recorded as 79.38 for an unspecified period within the data range. This suggests an extremely high level of turnover relative to working capital, reinforcing the observed pattern of low or negative working capital balances combined with robust revenue generation. However, due to the singular instance, trend analysis is inconclusive for this ratio.

Summary Insights

The data reflects a business model with consistently negative working capital, which in many cases can indicate efficient use of supplier credit and strong operating cash flow. The steep decline in working capital beginning in 2021 could signal expanding operational scale, increased payables, or shifts in inventory and receivables policy. Concurrently, revenue growth indicates ongoing expansion or strong market demand. The divergence between rising revenue and worsening working capital may imply increased risk related to liquidity, necessitating careful monitoring of short-term obligations and operational efficiency metrics in future periods.

The inventory turnover ratio demonstrates a generally positive trend over the observed periods, indicating improved efficiency in managing inventory. Starting at 12.55 at the end of 2017, this ratio increased steadily with minor fluctuations, reaching a peak around mid-2019 and early 2020, with values exceeding 15. Subsequent quarters show some variability but the ratio generally remains above 14, suggesting sustained effective inventory utilization. Notably, the ratio dipped slightly during certain quarters of 2021 but rebounded again through 2022 and into the first half of 2023, maintaining a level close to or above 14. This pattern reflects the company’s ability to turn over its inventory more frequently over time, which typically contributes to better cash flow and reduced holding costs.

The average inventory processing period corroborates the trends observed in the turnover ratio. The days required to process inventory decreased from 29 days at the end of 2017 to a low of around 22 days in early 2020, indicating faster inventory movement. However, there were periods where the processing time increased, notably in late 2020 and through 2021, reaching up to 28 days. This increase might reflect changes in supply chain efficiencies or inventory management strategies during that time. Nonetheless, the period shortened again in 2022 and stabilized around 25-26 days going into 2023, consistent with the turnover ratio’s improvement and suggesting a return to more efficient inventory handling.

Inventory Turnover Ratio

Demonstrated a consistent increasing trend from 12.55 to above 15 in the earlier period, with fluctuations stabilizing around 14-15 in the recent years, reflecting steady improvements in inventory management efficiency.

Average Inventory Processing Period

Declined initially from 29 days to about 22 days, indicating faster processing, followed by a temporary rise in processing days during 2021. The period then shortened again to around 25 days, aligning with the turnover ratio trends and indicating regained efficiency.

Overall, the data indicates that the company has improved its inventory management capabilities over the span of these periods, balancing turnover rates with processing time to maintain operational effectiveness. Periods of minor setbacks in 2020 and 2021 appear to have been addressed, leading to more consistent performance in managing inventory levels relative to sales and operational demand.

Receivables Turnover

The receivables turnover ratio exhibited a declining trend over the analyzed periods, falling from 15.35 at the end of 2017 to 12.23 by mid-2023. This indicates a gradual reduction in the frequency with which the company collects its receivables annually. Notably, the turnover ratio demonstrated relative stability between late 2017 and late 2019, fluctuating mostly between approximately 14 and 15. However, starting in early 2020, there was a more pronounced decline, reaching its lowest points around 11.55 and 11.78 during mid-2021, before slightly recovering but remaining lower than earlier levels.

Average Receivable Collection Period

Complementing the turnover data, the average receivable collection period showed an increasing tendency, moving from 24 days at the end of 2017 to around 30 days by mid-2023. Initially, the collection period held steady at approximately 25 days through 2018 and 2019. A rise was observed beginning in early 2020, coinciding with the decline in receivables turnover. Peaks in the collection period occurred in mid to late 2021, reaching about 32 and 31 days, signaling a slower collection process during that time frame. The period then stabilized but maintained a longer duration than in earlier years.

Overall Analysis

The financial data suggests a gradual deterioration in receivables management efficiency over the period studied. The decrease in receivables turnover, paired with the lengthening average collection period, indicates that the company has been taking longer to collect payments from customers. This trend may be attributed to changes in credit policy, customer payment behavior, or external factors affecting receivables turnover and collection speed. The relative stability prior to 2020 followed by a marked decline suggests that recent years, particularly around 2020 and 2021, posed challenges in cash collection, potentially influenced by broader economic conditions.

Average Inventory Processing Period

The average inventory processing period has shown a gradual decline from 29 days at the end of 2017 to 25 days by mid-2023. There was a steady decrease through 2018 and 2019, reaching a low of 22 days in early 2020. Subsequently, the period stabilized mostly around 25 to 28 days. This trend suggests improved inventory turnover efficiency beginning in 2018, with some fluctuations but overall maintaining shorter processing durations in recent years.

Average Receivable Collection Period

The average receivable collection period remained relatively stable around 24 to 26 days from late 2017 through 2019. Starting in early 2020, there was a slight increase, with periods reaching up to 30 days by mid-2023. The collection period showed variability during 2021 and 2022, peaking at 32 days in mid-2021 before settling near 28 to 30 days thereafter. This indicates a moderate lengthening in the time taken to collect receivables in recent years.

Operating Cycle

The operating cycle exhibited a mild downward trend from 53-56 days in 2017-2018 to about 48-49 days during 2019. However, starting in 2020, the cycle increased again, peaking around 60 days in mid-2021, before declining gradually to stabilize between 54 and 55 days through 2022 and mid-2023. This pattern reflects initial operational efficiency improvements followed by a period of extended cash conversion cycles, possibly due to longer collection periods or inventory durations, before settling into a stable mid-range operating cycle length.

Payables Turnover Ratio

The payables turnover ratio exhibits moderate fluctuations over the examined periods. Starting near 5.95 at the end of 2017, the ratio generally oscillates between 5.5 and 6.2. Notable peaks occur around mid-2019 and mid-2020, reaching approximately 6.19 and 6.22 respectively. Following these peaks, the ratio shows a downward tendency towards the end of 2020, hitting levels close to 5.65. In the most recent periods of 2022 and early 2023, the ratio stabilizes around 5.6 to 5.8, indicating relatively consistent payment speed to suppliers during this timeframe.

Average Payables Payment Period (Days)

The average payment period in days ranges mostly between 59 and 67 days throughout the reporting periods. The trend reveals occasional slight increases and decreases, with some prominent lengthening observed at the end of 2020 and throughout 2021, peaking at 67 days in mid and late 2021. Earlier periods, especially in 2019 and early 2020, reflect shorter payment periods averaging about 59 to 62 days, indicating faster settlement of payables during these times. From late 2021 onwards, the payment period remains relatively steady, fluctuating around 63 to 65 days, suggesting a modest extension in the time taken to pay suppliers compared to earlier years.

Relationship Between the Two Metrics

An inverse relationship is apparent between the payables turnover ratio and the average payment period, as expected. Periods characterized by higher turnover ratios correspond with shorter payment periods, and vice versa. For example, when the turnover peaked in mid-2019 and mid-2020, the payment period was at the lower end (around 59 days). Conversely, when the payment period extended towards 65-67 days in 2020 and 2021, the turnover ratio dipped closer to 5.6. This pattern reflects periodic adjustments in payment policies or cash flow management that influence the speed of settling obligations to suppliers.

The data indicates several noteworthy trends regarding the company's working capital management and cash flow efficiency over the reported periods.

Average Inventory Processing Period

The inventory processing period shows a general decline from 29 days at the end of 2017 to approximately 25-28 days in the later years. This decrease indicates improved inventory turnover and potentially more efficient inventory management. However, minor fluctuations are observed, with periods rising slightly around mid-2021 before stabilizing near 25-26 days.

Average Receivable Collection Period

The receivable collection period remains relatively stable, fluctuating mostly between 24 and 30 days. There is a slight upward trend in recent years, increasing from low 20s in early periods to nearly 30 days by mid-2023. This suggests a modest elongation in the time taken to collect receivables, possibly indicating a slight relaxation in credit terms or challenges in collections.

Average Payables Payment Period

The payables payment period varies around the 60 to 67 days range. Notable is an increase in this period during 2021, peaking around 65 to 67 days, which may indicate a strategic extension of payment terms or improved supplier financing. The payment period remains elevated compared to earlier years, suggesting a consistent approach to managing cash outflows over time.

Cash Conversion Cycle

The cash conversion cycle consistently remains negative throughout the periods, fluctuating between approximately -7 and -12 days. This indicates a strong working capital position where the company is able to convert its inventories and receivables to cash faster than it needs to pay its suppliers. The negative cycle appears most pronounced around 2018 to 2020 and again in late 2022, demonstrating efficient cash flow management during those times. Slight decreases toward -7 in 2021 correspond to periods where inventory processing and receivables collection times increased slightly.

Overall, the company maintains effective management of its working capital, reflected in a short and negative cash conversion cycle. While inventory turnover improves and payables periods extend moderately, receivables collection times see a slight increase. Continued monitoring of receivables is advisable to ensure that cash flow remains favorable.