Amphenol Corp. (NYSE:APH)

Inventory Turnover

The inventory turnover ratio displays moderate fluctuations over the analyzed periods, starting at 4.21 in the first quarter of 2020 and trending downward to a low around 3.61 in the third quarter of 2021. This was followed by a rebound to approximately 4.27 in the second quarter of 2023 before slightly declining again to 4.00 by the first quarter of 2024. This pattern suggests some variability in the efficiency of inventory management, with periods of slower inventory movement followed by recovery phases.

Receivables Turnover

Receivables turnover generally shows a declining trend from 5.28 in early 2020 to a valley near 4.41 by the end of 2020. Subsequently, the ratio increased notably, reaching levels slightly above 5.00 by early 2024. This indicates an improvement in collection efficiency after initial slowdown, with the company managing to collect outstanding receivables more quickly in the later periods.

Payables Turnover

Payables turnover experiences a declining trend from 6.83 in the first quarter of 2020 down to approximately 5.30 by the end of that year. A significant uptrend follows in the subsequent years, peaking at 7.64 in mid-2023, before settling slightly downward to 6.81 in early 2024. This suggests the company extended its payment periods during early periods, followed by a strengthening in terms of faster payables turnover subsequently.

Working Capital Turnover

The working capital turnover ratio illustrates a fairly steady increase, moving from 2.43 in early 2020 to 3.55 by the first quarter of 2024. The periodic fluctuations are generally positive, indicating improving efficiency in generating revenue from working capital over the analysis period.

Average Inventory Processing Period

The average number of days inventory is held demonstrates an overall increase from 87 days at the beginning of 2020 to a peak of 101 days in the third quarter of 2021, indicating slower inventory processing during that interval. Afterward, this period mostly decreases and stabilizes around 89 to 93 days through early 2024, reflecting efforts to accelerate inventory turnover post-peak.

Average Receivable Collection Period

The period to collect receivables lengthened from 69 days in the first quarter of 2020 to a maximum around 83 days by the end of that year. Thereafter, there is a consistent reduction, with values dropping to approximately 70-71 days by early 2024. This trend aligns with the improvements noted in receivables turnover, signaling enhanced credit management.

Operating Cycle

The operating cycle duration experienced an increasing trend in 2020, climbing from 156 days to a peak of 179 days in the third quarter of 2021, marking a lengthening of the period to convert inventory and receivables into cash. This cycle then declines to near 159 days by early 2023, followed by minor fluctuations but, overall, remains shorter than the prior peak, indicating improved operating efficiency over time.

Average Payables Payment Period

The average payment period to suppliers extended from 53 days to 69 days during 2020, suggesting delayed payments in that year. Subsequently, this period contracted steadily, falling to around 48-54 days in 2023 and early 2024, indicating a return towards faster payments and potentially improved supplier relationships or credit terms.

Cash Conversion Cycle

The cash conversion cycle remained relatively stable around the 100-110 day mark throughout the entire period, with slight peaks and troughs but no significant long-term trend. This stability suggests the company maintained a consistent overall cash flow conversion efficiency, despite fluctuations in individual components such as inventory and receivables periods.

The analysis of the quarterly financial data reveals several notable trends in cost of sales, inventories, and inventory turnover over the period under review.

Cost of Sales

The cost of sales exhibits a general increasing trend from March 2020 through December 2021, rising from approximately $1.3 billion to over $2 billion. This upward movement reflects growing operational activity or inflationary cost pressures across the quarters. However, starting from March 2022, there is a degree of fluctuation in cost of sales, with values oscillating between approximate lows of $2.03 billion and highs around $2.23 billion. By March 2024, the cost of sales slightly declines to just under $2.17 billion, indicating some stabilization or improved cost management during this latter period.

Inventories

Inventories have consistently increased from $1.33 billion at the beginning of 2020 to a peak exceeding $2.1 billion by early 2024. The growth trend is relatively steady, with notable acceleration during mid-2021 when inventories rose significantly from $1.57 billion to nearly $1.95 billion within just a few quarters. Despite minor quarterly variations, inventory levels have remained elevated in the $2.0 billion range throughout 2022 and 2023. The buildup of inventories suggests a strategic decision to support sales growth or to buffer supply chain constraints.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates a slight decline from 4.21 in March 2020 to a low near 3.61 in September 2021, indicating a slower pace of inventory movement relative to cost of sales during that timeframe. Following this trough, the ratio recovers somewhat, moving closer to 4.0 in subsequent quarters, albeit with some short-term fluctuations around this level. The stabilization near a ratio of 4.0 suggests that the company managed to maintain relatively balanced inventory efficiency despite the increasing inventory levels.

In summary, the data indicates an expansion in both cost of sales and inventories with a concurrent slight reduction and partial recovery in inventory turnover efficiency. This pattern may reflect growth in business activities accompanied by strategic inventory accumulation, with efforts to sustain inventory management effectiveness. The fluctuations in recent quarters point to responsiveness to market or internal operational changes that merit continued monitoring.

The analysis of the quarterly financial data reveals several key trends related to net sales, accounts receivable, and receivables turnover ratios over the examined periods.

Net Sales

Net sales exhibited a generally upward trajectory from March 2020 through December 2021, increasing from approximately 1.86 billion USD to over 3.02 billion USD. Following this peak, net sales fluctuated somewhat but largely remained above 3 billion USD, reflecting growth compared to the earlier periods. The highest sales figure was observed in December 2023 with roughly 3.33 billion USD. Despite some short-term declines, the overall pattern indicates expanding sales over the nearly four-year span, suggesting positive demand trends or successful commercial initiatives.

Accounts Receivable, Net

The value of accounts receivable, net of doubtful accounts, trended upward in line with net sales, reaching a peak in December 2021 at approximately 2.45 billion USD. Subsequently, the figures showed minor fluctuations but stayed relatively stable around this level, with values ranging between about 2.41 billion USD and 2.63 billion USD in the most recent quarters. This steady level of receivables corresponds to the elevated sales volumes. The slight decrease in March 2024 to around 2.50 billion USD indicates effective collection or slight moderation in credit extended to customers.

Receivables Turnover Ratio

Receivables turnover ratio, a measure of how efficiently the company collects its accounts receivable, showed noticeable variation over the periods. It declined from 5.28 in March 2020 to a low near 4.41-4.43 in the last two quarters of 2020 and in December 2021, indicating slower collection periods or increased credit extension during these times. From early 2022 onwards, the ratio generally improved, peaking above 5.24 in March 2023, which suggests improved collection efficiency or tighter credit policies. However, some fluctuation continued, with recent values around 4.79 to 5.13 in early 2024, reflecting modest variation in collection performance.

Overall, the data indicate consistent sales growth accompanied by a proportional increase in accounts receivable. The receivables turnover ratio demonstrates periods of loosening and tightening in credit management, with recent improvements in collection efficiency. These patterns suggest ongoing efforts to balance growth with effective management of credit risk and working capital.

The cost of sales demonstrates an overall rising trend from March 31, 2020, to December 31, 2021, increasing from approximately 1.30 billion to 2.09 billion US dollars in thousands. Following this peak, the figures fluctuate with a slight downward adjustment towards the end of the observed period, reaching around 2.17 billion by March 31, 2024. This pattern suggests a period of growth followed by stabilization and some volatility in cost management.

Accounts payable also exhibit growth from March 31, 2020, to December 31, 2021, increasing from about 817 million to approximately 1.31 billion US dollars in thousands. However, from early 2022 through the first quarter of 2024, the payable balances show more variability, with declines and subsequent recoveries that culminate in a balance near 1.26 billion as of March 31, 2024. This indicates fluctuations in the company’s obligations to suppliers or creditors over the quarters.

The payables turnover ratio shows a downward trend from 6.83 in March 2020 to a low point near 5.3 in December 2020, suggesting a slower rate of paying off suppliers during that period. Subsequently, this ratio gradually recovers and peaks at 7.64 in June 2023, indicating an improved pace in settling payables. However, it declines again towards the first quarter of 2024, settling at 6.81. These movements reflect changing efficiency in managing payment cycles and possibly shifts in working capital strategy over time.

Cost of Sales

Overall upward trend till late 2021, followed by fluctuations and slight decreases till early 2024.

Accounts Payable

General increase through 2021, followed by variability and partial decline, stabilizing near 1.26 billion by early 2024.

Payables Turnover

Initial decline in 2020, gradual improvement through mid-2023, with some reduction thereafter, indicating fluctuating payment efficiency.

Working Capital

The working capital values show some variability over the observed periods. Beginning at approximately $3.35 billion in the first quarter of 2020, there is a noticeable decline reaching around $2.83 billion by mid-2020. Subsequently, working capital increases and peaks near $4.03 billion in the third quarter of 2021, followed by a general downward trend through 2024, ending at roughly $3.62 billion. This pattern suggests fluctuations influenced by operational changes or shifts in current assets and liabilities, with no consistent upward or downward trajectory maintained over the entire period.

Net Sales

Net sales exhibit an overall increasing trend throughout the quarters. Starting at approximately $1.86 billion in the first quarter of 2020, sales grow steadily, reaching a peak above $3.29 billion in the third quarter of 2022. After this peak, there is some fluctuation but sales remain generally elevated, ending near $3.26 billion in the first quarter of 2024. The data reflects stronger demand or improved market positioning contributing to revenue growth over the analyzed period.

Working Capital Turnover

The working capital turnover ratio demonstrates a generally increasing trend from early 2020 to the first quarter of 2024. Initially at 2.43 in the first quarter of 2020, the ratio experiences some variability but rises to consistently above 3.0 starting from late 2021, reaching about 3.55 by the first quarter of 2024. This increase indicates improved efficiency in utilizing working capital to generate sales, suggesting enhanced operational effectiveness or better management of current assets and liabilities in relation to sales performance over time.

Overall Insights

Over the observed periods, net sales have shown a robust upward trend, reflecting growing revenue. While working capital has fluctuated without a clear long-term pattern, the increasing working capital turnover ratio points to improved efficiency in using working capital to support sales. The periods of decreasing working capital combined with rising sales and turnover ratios may indicate more effective working capital management. Conversely, peaks in working capital might coincide with buildup of current assets or liquidity buffer adjustments. Together, these observations suggest operational improvements in asset management amidst growing market activity.

The analysis of inventory management efficiency over the reported periods reveals distinct trends in both inventory turnover and average inventory processing period.

Inventory Turnover Ratio

The inventory turnover ratio shows a gradual decrease from the beginning of 2020 through the end of 2021, slipping from around 4.21 to a low of approximately 3.61 in the third quarter of 2021. Following this decline, there is a modest recovery in turnover rates throughout 2022, stabilizing just above 4.0. In 2023, the ratio experiences mild fluctuations, peaking at 4.27 in the second quarter before dipping slightly toward the end of the year and into the first quarter of 2024, where it settles again at around 4.0. This pattern suggests initial challenges in inventory movement that later improved, regaining efficiency similar to early 2020 levels.

Average Inventory Processing Period

Complementary to the turnover ratio, the average inventory processing period generally ranges between 85 and 101 days. The period lengthens progressively from 87 days in early 2020, peaking near 101 days in the third quarter of 2021, indicating slower inventory processing times during this phase. Subsequently, a moderate reduction is observed through 2022, with processing days decreasing to around 89 days by the year's end. In 2023, the processing period fluctuates somewhat but generally remains in the high 80s to low 90s range, consistent with a more stable inventory cycle. The data for early 2024 continues this trend, suggesting maintained efficiency without significant disruptions.

Overall, the interplay between the two metrics points to a period of inventory management strain culminating in late 2021, followed by a recovery phase marked by improved turnover and reduced holding times. This dynamic indicates adaptive strategies that mitigated earlier inefficiencies, leading to steady state inventory processing by early 2024.

Receivables Turnover

The receivables turnover ratio displays a descending trend during the initial periods starting from March 31, 2020, at 5.28, declining to a low around December 31, 2020, at 4.41. Following this, the ratio stabilizes with minor fluctuations through 2021 and 2022, generally staying between approximately 4.4 and 4.8. In the most recent quarters of 2023 and early 2024, the ratio shows a moderate upward trend, peaking at 5.24 on March 31, 2023, before settling near 5.13 by March 31, 2024. This pattern suggests an initial slowdown in turnover efficiency, followed by a recovery and improvement in the ability to collect receivables more frequently over the later periods.

Average Receivable Collection Period

The average receivable collection period inversely mirrors the changes in the turnover ratio, with higher days corresponding to lower turnover and vice versa. Initially, days outstanding increase from 69 days at March 31, 2020, reaching a peak of 83 days by December 31, 2020. After this peak, the collection period generally decreases, trending down to about 70 days by March 31, 2023, indicating a more efficient collection process. However, a slight increase is observed towards late 2023, with the days rising to 76-77 before improving to 71 days as of March 31, 2024. This fluctuation indicates some variability in collection efficiency but with an overall improvement compared to the start of the period analyzed.

Overall Insights

The data suggests that the company faced some challenges in receivables management during 2020, likely delaying collections and reducing turnover frequency. Subsequently, improvements are evident through 2021 into early 2023, reflecting enhanced credit control or collection efficiency. Though some minor fluctuations occur late in 2023, the most recent data indicates a return to stronger receivables performance. These trends point toward effective management adjustments and operational stabilization over the longer term.

The analysis of the financial periods reveals several trends in the company's working capital efficiency as reflected by the average inventory processing period, average receivable collection period, and the overall operating cycle.

Average Inventory Processing Period

The inventory processing period showed a general upward trend from March 2020 to September 2021, increasing from 87 days to a peak of 101 days. This suggests a lengthening in the time inventory remains on hand, which may indicate challenges in inventory turnover or supply chain delays during this period. Following this peak, there was a notable reduction towards the end of 2021 and into 2023, stabilizing around 89 to 91 days in the most recent quarters, with a slight increase observed again towards the end of 2023 and into the beginning of 2024. Overall, inventory management appears to have fluctuated but shows some improvement from the highs observed in mid-2021.

Average Receivable Collection Period

The receivable collection period experienced considerable variability over the time span analyzed. It increased from 69 days in March 2020, peaking near 83 days by the end of that year, indicating a slower collection process. In 2021 and 2022, the collection period hovered around 77 to 82 days, reflecting a somewhat stable but moderately high collection timeframe. A decrease is apparent starting in early 2023, with collection periods dropping to the low 70s by March 2024, suggesting an improvement in the efficiency of collecting receivables and potentially better cash flow management during this recent period.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, shows an initial lengthening from 156 days in March 2020 to a peak of 179 days in September 2021. This increase corresponds with the extension in both inventory and receivables periods and indicates a longer time frame tied up in working capital. Post-September 2021, the operating cycle gradually shortens, reaching 159 days at the start of 2023 and maintaining a moderate level around the mid-160 days range through early 2024. This suggests improved operational efficiency and a more effective conversion of resources into cash flow in recent quarters.

The analysis of the payables turnover ratio reveals a fluctuating yet generally improving trend over the observed periods. Initially, the ratio declined from 6.83 in the first quarter of 2020 to a low of 5.3 by the end of that year. This decrease indicates a slower rate of paying off suppliers during that timeframe. Starting in early 2021, the ratio showed signs of recovery, with values oscillating but tending upward, reaching a peak of 7.64 in the second quarter of 2023. Following this peak, a slight decline is observed, but the turnover largely remains higher compared to the earlier periods, suggesting a strengthened ability to settle payables more rapidly in recent quarters.

Correspondingly, the average payables payment period, measured in days, exhibits an inverse pattern relative to the turnover ratio, as expected due to their mathematical relationship. The payment period extended from 53 days at the beginning of 2020 to a peak of 69 days in the fourth quarter of 2020, implying delays or longer credit terms in supplier payments during this period. Subsequently, the payment period decreased significantly over the next two years, hitting a low of 48 days in the second quarter of 2023. This reduction points toward improved payment efficiency or possibly renegotiated terms with suppliers. Following this minimum, the payment period again saw a moderate increase but stayed below earlier high levels, standing at 54 days by the first quarter of 2024.

In summary, the financial data reflects a period of initial slowdown in payables turnover accompanied by longer payment cycles through the end of 2020, followed by a recovery phase with more frequent payments to suppliers and shortened payment periods extending into mid-2023. The trends indicate enhanced management of payables and improved liquidity position, although some variability remains in the later periods. These dynamics suggest a responsive approach to payable management, potentially influenced by external economic factors or internal strategic adjustments.

Payables Turnover Ratio

Displayed an initial decline from 6.83 to 5.3 during 2020, followed by a general upward trend culminating in 7.64 in mid-2023 before a slight decrease.

Average Payables Payment Period

Increased from 53 to 69 days through 2020, then decreased steadily to a low of 48 days in mid-2023, with a modest rise thereafter to 54 days by early 2024.

Overall Observation

The inverse relationship between the two metrics highlights improved payment efficiency and supplier payment practices after 2020, contributing to better liquidity management.

Inventory Processing Period

The average inventory processing period shows fluctuations over the quarters, starting at 87 days in early 2020 and gradually increasing to a peak of 101 days in the third quarter of 2021. After this peak, there is a decline toward the end of 2021 followed by a relatively stable period around the high 80s to low 90s from 2022 onwards. The period ends at 91 days in early 2024, indicating some stabilization but slightly above the earlier years' average.

Receivable Collection Period

The receivable collection period exhibits more variability with a significant increase from 69 days in the first quarter of 2020 to a peak near 83 days at the end of 2020. From 2021 onward, the period hovers around the high 70s to low 80s but trends slightly downward towards the first quarter of 2024, where it falls to 71 days. This suggests a somewhat improved collection efficiency in recent quarters compared to the pandemic's peak impact period.

Payables Payment Period

This period initially increases from 53 days at the start of 2020 to about 69 days by the end of 2020, indicating an extended duration in settling payables. From 2021 to 2024, a downward trend is observed reaching a low of 48 days in mid-2023 before slightly increasing again to 54 days in the first quarter of 2024. This reduction suggests the company may have been accelerating its payments to suppliers more recently, potentially improving supplier relations or responding to changing credit terms.

Cash Conversion Cycle

The cash conversion cycle maintains a relatively high and stable range around 100+ days throughout the entire period. Initially at 103 days in early 2020, the cycle slightly rises to a peak of 112 days in late 2021. Since then, it oscillates in a narrow band from about 108 to 112 days with a slight dip at the end of 2023 and stabilizing at 108 days in early 2024. This suggests consistent overall working capital management performance with limited improvement in reducing the cycle duration.