Amphenol Corp. (NYSE:APH)

The analysis of the financial ratios and related periods reveals several important trends over the five-year span.

Inventory Turnover

The inventory turnover ratio shows a generally declining trend, dropping from 4.28 in 2019 to 3.91 in 2023. This indicates a slowing rate at which inventory is sold and replaced. Correspondingly, the average inventory processing period increased from 85 days in 2019 to 93 days in 2023, reflecting longer holding times for inventory.

Receivables Turnover

The receivables turnover ratio decreased slightly from 4.74 in 2019 to 4.41 in 2020, then stabilized around 4.4 to 4.8 in subsequent years, ending at 4.79 in 2023. The average receivable collection period rose from 77 days in 2019 to a peak of 83 days in 2020, then decreased to 76 days for 2022 and 2023, indicating improved efficiency in collecting receivables towards the end of the period.

Payables Turnover

The payables turnover ratio decreased significantly from 6.47 in 2019 to 5.3 in 2020, then incrementally improved to 6.27 in 2023. The average payables payment period followed a similar pattern, rising from 56 days in 2019 to 69 days in 2020, then shortening again to 58 days by 2023. This suggests a management strategy of extending payment periods during 2020, potentially to preserve liquidity, before normalizing payment terms thereafter.

Working Capital Turnover

Working capital turnover dropped sharply from 3.96 in 2019 to 2.7 in 2020, indicating less efficient use of working capital to generate sales during that year. Thereafter, it exhibited a gradual recovery, reaching 3.41 in 2023, but remaining below the initial 2019 level.

Operating Cycle

The operating cycle, representing the total time to convert inventory and receivables into cash, increased from 162 days in 2019 to a high of 174 days in 2021, then improved slightly to 169 days by 2023. This reflects a longer overall working capital cycle during the middle years with some recovery later.

Cash Conversion Cycle

The cash conversion cycle decreased slightly from 106 days in 2019 to 104 days in 2020 but then increased progressively to 111 days in 2023. The lengthening cash conversion cycle indicates that the time to convert investments in inventory and other resources to cash has generally increased, potentially putting pressure on cash flow.

Overall, the data suggest that the company experienced a dip in operational efficiency and working capital management during the 2020 to 2021 period, coinciding with longer holding times for inventory and receivables and extended payment terms. Although some recovery is evident in later years, the cash conversion cycle remains longer in 2023 compared to the initial year, which may warrant attention to improve liquidity and asset utilization further.

Cost of Sales

The cost of sales demonstrated a consistent upward trend from 2019 through 2022, increasing from approximately 5.6 billion US dollars in 2019 to about 8.6 billion US dollars in 2022. This represents a notable rise over the four-year period. However, in 2023, the cost of sales slightly declined to approximately 8.47 billion US dollars, indicating a potential stabilization or slight reduction in production or procurement expenses after a period of growth.

Inventories

Inventories steadily increased over the five-year span. Starting at approximately 1.31 billion US dollars in 2019, inventories rose each year, reaching about 2.17 billion US dollars by the end of 2023. This consistent growth suggests either an accumulation of stock or increased investment in inventory to support sales or operations, which could impact liquidity or operational efficiency if not matched by corresponding sales growth.

Inventory Turnover

The inventory turnover ratio showed a general declining trend from 4.28 times in 2019 to 3.91 times in 2023, with a slight variation in 2022 when it increased to 4.11 times. The overall decrease signals that the company is turning over its inventory less frequently across the years, which may mean slower sales, longer inventory holding periods, or changes in inventory management practices. The slight improvement in 2022 may indicate some operational adjustments, but the reversion to 3.91 in 2023 suggests the trend towards lower turnover resumed.

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

Net Sales

Net sales demonstrated a consistent upward trend from 2019 through 2022, increasing from approximately $8.23 billion to $12.62 billion. However, in 2023, net sales experienced a slight decline, registering $12.55 billion, a marginal decrease from the previous year.

Accounts Receivable, less Allowance for Doubtful Accounts

Accounts receivable exhibited steady growth throughout the period. The balance increased from about $1.74 billion in 2019 to $2.63 billion in 2022, followed by a slight decline to $2.62 billion in 2023. This trend closely aligns with the trajectory of net sales.

Receivables Turnover Ratio

The receivables turnover ratio showed minor fluctuations but remained relatively stable over the five years. Starting at 4.74 in 2019, it dipped to 4.41 in 2020, then modestly improved to 4.43 in 2021. The ratio increased further to 4.80 in 2022 and slightly decreased to 4.79 in 2023. This stability indicates consistent efficiency in collecting receivables despite variations in sales and receivables balances.

Overall, the data reflects strong growth in sales and corresponding increases in accounts receivable, with the company maintaining steady efficiency in receivables collection. The slight decline in net sales and accounts receivable in 2023 may suggest a stabilization phase after several years of expansion.

Cost of Sales

The cost of sales demonstrated a consistent upward trend from 2019 to 2022, increasing from approximately 5.61 billion to 8.59 billion US dollars. This indicates rising production or procurement expenses over these years. However, in 2023, the cost of sales slightly declined to about 8.47 billion US dollars, suggesting a possible improvement in cost management or a reduction in sales volume.

Accounts Payable

Accounts payable showed a steady increase from 866.8 million US dollars in 2019 to 1.35 billion US dollars in 2023. This gradual rise indicates that the company has been extending its payment obligations or benefiting from more favorable credit terms with suppliers over time.

Payables Turnover Ratio

The payables turnover ratio fluctuated over the period. Starting from 6.47 in 2019, it declined to 5.3 in 2020, indicating a slower rate of payment to suppliers. The ratio then slightly recovered to 5.7 in 2021, followed by a significant increase to 6.57 in 2022, signaling more efficient or faster payments. The ratio decreased moderately to 6.27 in 2023, still higher than the 2020 and 2021 levels, suggesting that overall payment efficiency improved compared to mid-period but slightly less so than in 2022.

The financial data reveals several key trends over the five-year period. Working capital increased steadily from approximately 2.08 billion US dollars at the end of 2019 to a peak of about 3.80 billion US dollars at the end of 2022, before experiencing a slight decrease to roughly 3.68 billion US dollars in 2023. This overall upward movement indicates a consistent growth in short-term assets relative to short-term liabilities, suggesting an improved liquidity position over the observed timeframe.

Net sales displayed a continuous upward trend from around 8.23 billion US dollars in 2019 to over 12.62 billion US dollars in 2022. However, in 2023, net sales slightly declined to approximately 12.55 billion US dollars. Despite this marginal dip, the overall progression points to considerable revenue growth, with the most substantial increases observed between 2020 and 2022.

The working capital turnover ratio, which measures the efficiency with which working capital is used to generate sales, generally increased after a notable drop in 2020. Initially, the ratio declined from 3.96 in 2019 to 2.7 in 2020, indicating less efficient use of working capital during that year. Following 2020, the ratio recovered and improved progressively, reaching 3.41 by 2023. This recovery suggests an enhancement in operational efficiency, with the company generating higher sales per unit of working capital over time.

Working Capital

Exhibited a steady increase over the period, reflecting improved liquidity with only a slight reduction in the most recent year.

Net Sales

Showed significant growth throughout the period, peaking in 2022 before a small decline in 2023, indicating a robust overall revenue expansion with minor recent fluctuation.

Working Capital Turnover

Experienced a decline in 2020, suggesting temporary inefficiency in capital use, but improved consistently thereafter, signaling better utilization of working capital in generating sales.

Inventory Turnover

The inventory turnover ratio exhibited a general declining trend over the five-year period. Starting at 4.28 in 2019, the ratio decreased to 4.06 in 2020 and continued to decline to 3.95 in 2021. A slight recovery was observed in 2022 with an increase to 4.11, followed by a subsequent decrease to 3.91 in 2023. This suggests a gradual reduction in the frequency at which inventory was sold and replaced annually, indicating potential challenges in inventory management or changes in sales dynamics.

Average Inventory Processing Period

Correspondingly, the average inventory processing period showed an increasing trend overall, moving from 85 days in 2019 to 90 days in 2020, and further increasing to 92 days in 2021. A minor improvement was noted in 2022 when the period decreased to 89 days. However, in 2023, the period increased again to 93 days. This increase in the number of days inventory remains on hand aligns inversely with the inventory turnover trend, suggesting slower inventory movement and potential accumulation of stock over time.

The data reflects the trends in receivables turnover and average receivable collection period over a five-year span. These metrics provide insight into the efficiency of the company's credit and collection policies and its ability to manage receivables.

Receivables Turnover

Receivables turnover shows a slight decline from 4.74 in 2019 to 4.41 in 2020, indicating a slower conversion of receivables into cash during that period. This decreased efficiency could be related to external factors impacting customer payment behaviors. However, from 2020 onward, the turnover ratio gradually improved, rising to 4.43 in 2021 and continuing to increase to 4.8 in 2022, before stabilizing at 4.79 in 2023. This trend suggests a recovery in collection efficiency, with the company managing receivables more effectively after 2020.

Average Receivable Collection Period

The average collection period aligns inversely with the turnover ratio, starting at 77 days in 2019 and increasing to 83 days in 2020, signaling longer payment times from customers. It then slightly decreased to 82 days in 2021 and dropped more noticeably to 76 days in 2022, where it remained steady in 2023. This reduction in days to collect receivables post-2020 corresponds to the improvement in turnover ratios, indicating better cash flow management and possibly improvements in credit control or customer payment behavior.

Overall, the figures demonstrate a temporary dip in receivable management efficiency around 2020, which recovers in the following years. By 2023, both ratios reflect a relatively stable and efficient management of receivables compared to the earlier years in the period.

Average Inventory Processing Period

The average inventory processing period exhibits an overall increasing trend over the five-year span. It starts at 85 days in 2019, rises steadily to 90 days in 2020 and 92 days in 2021, decreases slightly to 89 days in 2022, and then increases again to 93 days in 2023. This pattern suggests that inventory turnover has generally slowed, indicating that inventory remains on hand for a longer duration before being processed or sold.

Average Receivable Collection Period

The average receivable collection period shows some fluctuation. It increased from 77 days in 2019 to 83 days in 2020, then decreased marginally to 82 days in 2021. A more marked improvement is seen in 2022 and 2023, with the period shortening to 76 days for both years. This indicates a positive trend in collection efficiency in the most recent years, reflecting improved management of receivables and potentially better cash flow timing.

Operating Cycle

The operating cycle, which combines inventory and receivable periods, follows a pattern similar to that of the inventory processing period. It increased from 162 days in 2019 to a peak of 174 days in 2021, then shortened to 165 days in 2022 before slightly increasing again to 169 days in 2023. This reveals that while the company experienced lengthening cash conversion cycles initially, there has been some improvement in recent years, although the cycle remains longer than the initial 2019 level.

Payables Turnover Ratio

The payables turnover ratio experienced a decline from 6.47 in 2019 to 5.3 in 2020, indicating a slower rate of paying suppliers during that period. This ratio showed some recovery in the following years, increasing to 5.7 in 2021 and further rising to 6.57 in 2022, which suggests an improvement in the efficiency of payable management. In 2023, there was a slight decrease to 6.27, but the ratio remains close to the higher levels seen in 2022.

Average Payables Payment Period (Days)

The average payables payment period lengthened significantly from 56 days in 2019 to 69 days in 2020, reflecting a slower payment cycle to suppliers during that year. Subsequently, this metric shortened to 64 days in 2021 and then returned to the initial shorter period of 56 days in 2022, indicating a restoration of quicker payment practices. In 2023, a slight increase to 58 days was observed, though the payment period remains relatively consistent with the earlier years apart from 2020.

Overall Insights

The data reveals a temporary disruption in payable turnover and payment periods in 2020, likely tied to external factors affecting cash flow or operational conditions during that year. Following 2020, the company demonstrated a recovery towards pre-2020 payment efficiency levels by 2022. The slight variations in 2023 suggest stability in payment practices, maintaining moderately efficient payable management close to the norms observed in 2019 and 2022.

Average Inventory Processing Period

The average inventory processing period demonstrates a slight upward trend over the five-year span, increasing from 85 days at the end of 2019 to 93 days by the end of 2023. There was a minor fluctuation in 2022 where the period briefly decreased to 89 days before rising again, indicating a general increase in the time inventory is held.

Average Receivable Collection Period

The average receivable collection period shows some variability but remains relatively stable overall. It rose from 77 days in 2019 to 83 days in 2020, followed by a modest decline to 82 days in 2021, and a more noticeable decrease to 76 days in both 2022 and 2023. This suggests improved efficiency in collecting receivables in the last two years.

Average Payables Payment Period

The average payables payment period experienced fluctuations during the period observed. Beginning at 56 days in 2019, it increased significantly to 69 days in 2020, then decreased to 64 days in 2021. It further narrowed to 56 days in 2022 and slightly increased to 58 days in 2023. The pattern indicates varying supplier payment strategies with a peak in 2020.

Cash Conversion Cycle

The cash conversion cycle (CCC) stayed relatively consistent, oscillating between 104 and 111 days during the five years. Starting at 106 days in 2019, it dropped slightly to 104 days in 2020, then rose to 110 in 2021, followed by a marginal decrease to 109 days in 2022, and a minor increase to 111 days in 2023. This stability implies that the overall liquidity management and operating efficiency have remained steady despite fluctuations in individual components of the cycle.