CVS Health Corp. (NYSE:CVS)

Inventory Turnover

The inventory turnover ratio shows a consistent upward trend from 11.88 in 2020 to 17.75 in 2024, indicating increasing efficiency in managing and selling inventory over the years. This improvement suggests more rapid inventory movement, with the company likely optimizing stock levels or boosting sales.

Receivables Turnover

The receivables turnover ratio exhibits a gradual decline, dropping from 12.32 in 2020 to approximately 10.16 in 2024. This decreasing trend suggests a slower collection of receivables, indicating that customers may be taking longer to pay, potentially impacting cash flow negatively.

Payables Turnover

The payables turnover ratio fluctuates slightly but remains relatively stable, moving from 19.72 in 2020 down to 18.07 in 2022, then increasing again to around 20.22 by 2024. This pattern indicates a consistent capacity to manage payables, with some variability in payment timing to suppliers.

Average Inventory Processing Period

The average inventory processing period steadily decreases from 31 days in 2020 to 21 days in 2024, consistent with the rising inventory turnover ratio. This reduction indicates that inventory is held for shorter durations before being sold, reflecting enhanced inventory management efficiency.

Average Receivable Collection Period

The average collection period increases from 30 days in 2020 to 36 days in 2023 and 2024, aligning with the decline in receivables turnover. This trend highlights a lengthening in the time taken to collect outstanding payments from customers, which may require attention to maintain liquidity.

Operating Cycle

The operating cycle remains relatively stable, fluctuating slightly around 57-61 days over the five years. This stability suggests that the combined duration of inventory processing and receivables collection is maintained, despite changes in individual components.

Average Payables Payment Period

The average payables payment period persists near 18 to 20 days throughout the period, with a slight decrease from 20 days in 2022 to 18 days in 2023 and 2024. This stable timeframe reflects consistent payment practices to suppliers.

Cash Conversion Cycle

The cash conversion cycle decreases from 42 days in 2020 to a low of 37 days in 2022, followed by a slight increase back to 39-40 days in 2023 and 2024. This pattern indicates that the net time taken between cash outflow to suppliers and cash inflow from customers has slightly improved overall, though there was a minor reversal in the most recent years.

Cost of revenues

The cost of revenues exhibits a consistent upward trend over the five-year period from 2020 to 2024. It increased from $219,660 million in 2020 to $321,408 million in 2024, indicating a substantial rise in the company's expenses related to goods sold or services delivered. This growth suggests an expansion in business operations, higher production volumes, or increased input costs.

Inventories

Inventory levels display moderate fluctuations throughout the period. Starting at $18,496 million in 2020, inventories decreased slightly in 2021, then rose in 2022 before declining again in 2023 and stabilizing in 2024 around $18,107 million. This pattern may reflect efforts to optimize inventory management or changes in supply chain conditions, aiming to maintain sufficient stock while controlling holding costs.

Inventory turnover ratio

The inventory turnover ratio shows a clear positive trend, increasing from 11.88 in 2020 to 17.75 in 2024. This improvement indicates that the company is converting its inventory into sales more rapidly over time. The rising turnover ratio coupled with relatively stable inventory levels and increasing cost of revenues suggests enhanced operational efficiency, better demand forecasting, or stronger sales performance.

Revenues from customers

Revenues exhibit a consistent upward trend over the five-year period, increasing from $267,908 million in 2020 to $370,656 million in 2024. This progression indicates steady growth in sales and customer income, with the most notable annual increase occurring between 2022 and 2023.

Accounts receivable, net

The net accounts receivable balance also shows a continuous rise from $21,742 million in 2020 to $36,469 million in 2024. This increment corresponds with the growing revenues, suggesting that the company's credit sales are expanding in line with overall sales but may also imply a longer collection period or increased credit risk.

Receivables turnover

Receivables turnover ratio demonstrates a declining trend, dropping from 12.32 in 2020 to around 10.16 in 2024. This decline indicates that the company is collecting its receivables less frequently over time, which could reflect extended payment terms or slower customer payments relative to prior years.

Cost of Revenues

The cost of revenues has exhibited a consistent upward trend over the analyzed periods. Starting from approximately 219.7 billion US dollars at the end of 2020, it increased steadily to 321.4 billion US dollars by the end of 2024. This indicates a consistent rise in the expenses directly associated with the generation of the company’s revenues, suggesting either growth in sales volume, higher input costs, or a combination of both.

Accounts Payable

Accounts payable also showed a gradual increase from 11.1 billion US dollars in 2020 to nearly 15.9 billion US dollars in 2024. The increase appears steady, though the growth rate is somewhat moderate compared to the rise in cost of revenues. This suggests the company’s short-term liabilities towards its suppliers have grown, aligning with the increasing operational scale reflected in the higher cost of revenues.

Payables Turnover Ratio

The payables turnover ratio generally declined between 2020 and 2022, moving from 19.72 to 18.07. This suggests a slower rate of payment to suppliers during this period. However, from 2022 onwards, there is a noticeable rebound to 20.36 in 2023 and a slight decrease to 20.22 in 2024. The increase after 2022 signals an improvement in the efficiency of managing payables, with the company possibly accelerating payments or benefiting from better payment terms.

Overall Insights

The analysis reveals that while the cost of revenues and accounts payable have increased significantly over the five years, the company’s payables turnover ratio has fluctuated, indicating changes in payment practices. Initially, there was a tendency to slow payments to suppliers, potentially for working capital management, followed by a shift towards faster payment cycles in later years. The trends point to a scaling operation with heightened purchasing activity and adjustments in payment management strategies to optimize working capital.

The financial data over the five-year period reveals several noteworthy trends. Revenues from customers have consistently increased each year, reflecting a positive growth trajectory. Starting at approximately $267.9 billion in 2020, revenues rose to about $370.7 billion by 2024, indicating a substantial expansion in the company's sales or service activities.

In contrast, working capital demonstrates a persistent negative balance throughout the period, which becomes increasingly pronounced. The working capital started at negative $5.6 billion in 2020 and deteriorated steadily to nearly negative $16 billion by 2024. This growing deficit suggests that the company's current liabilities exceed its current assets by a significant margin, potentially implying liquidity challenges or a strategic use of working capital financing methods.

The absence of reported working capital turnover ratios prevents further analysis of the efficiency with which the company is utilizing its working capital to generate sales.

Revenues from customers

Exhibited a continuous upward trend over the five years, increasing by nearly 38% from 2020 to 2024.

Working capital

Persistently negative and worsening each year, which could indicate growing short-term liabilities or operational funding strategies.

Working capital turnover

Data not available; therefore, the assessment of working capital efficiency is not feasible.

The analysis of the annual data reveals a consistent improvement in inventory management efficiency over the five-year period. The inventory turnover ratio has increased steadily from 11.88 in 2020 to 17.75 in 2024, indicating that the company is converting its inventory to sales more rapidly each year.

Correspondingly, the average inventory processing period has decreased from 31 days in 2020 to 21 days in 2024. This reduction in days suggests enhanced operational efficiency, allowing the company to hold and sell inventory faster, which potentially reduces holding costs and risk of obsolescence.

Inventory Turnover Ratio

Increased each year, from 11.88 to 17.75, showing improved sales relative to inventory.

Average Inventory Processing Period

Declined from 31 days to 21 days, indicating quicker inventory turnover and better management.

Overall, the trends signify that the company has been successful in optimizing its inventory processes, which may contribute positively to cash flow and working capital management.

Receivables Turnover

The receivables turnover ratio demonstrates a gradual decline over the analyzed period, decreasing from 12.32 in 2020 to 10.16 in 2024. This downward trend indicates that the company is collecting its receivables more slowly over time, reflecting a potential increase in credit risk or changes in credit policies.

Average Receivable Collection Period

The average receivable collection period exhibits an increasing trend, rising from 30 days in 2020 to 36 days by 2023 and remaining steady in 2024. This elongation suggests that customers are taking longer to settle their accounts, which aligns with the observed decrease in receivables turnover.

Overall Analysis

The simultaneous decline in receivables turnover and increase in collection period signal a weakening efficiency in receivable management. This pattern may affect cash flow timing and warrants attention to credit control practices to mitigate potential liquidity risks.

Inventory Management

The average inventory processing period demonstrates a clear downward trend from 31 days in 2020 to 21 days by 2024. This reduction suggests an improvement in inventory turnover efficiency, likely indicating better inventory control or faster movement of goods through the supply chain over the analyzed period.

Receivables Collection

The average receivable collection period shows stability initially, maintaining around 30 to 31 days from 2020 to 2022. However, there is an increase to 36 days in both 2023 and 2024, indicating a slower collection process in recent years. This could imply extended credit terms to customers or challenges in receivables management during the latter periods.

Operating Cycle

The operating cycle, which combines the inventory processing period and receivable collection period, exhibits relative stability with minor fluctuations between 57 and 61 days over the five-year span. Despite improvements in inventory turnover, the elongation of the receivable collection period offsets these gains, resulting in an overall operating cycle that remains nearly constant.

Overall Insight

The data indicates that while there has been significant progress in inventory efficiency, the benefits are somewhat mitigated by a lengthening receivables period. This suggests that improvements in supply chain management are not yet fully reflected in the company's cash conversion cycle, which remains stable. Management may consider focusing on tightening credit policies or enhancing receivable collections to improve the overall operating cycle further.

Payables Turnover

The payables turnover ratio exhibits a variable trend over the five-year period. It declined gradually from 19.72 in 2020 to 18.07 in 2022, indicating a slower rate of paying off suppliers during this time. However, there was a notable recovery with an increase to 20.36 in 2023, followed by a slight decline to 20.22 in 2024. Overall, the turnover ratio in 2024 is higher than in 2020, suggesting improved efficiency in managing payables compared to the beginning of the period.

Average Payables Payment Period

The average payables payment period showed a slight increase from 19 days in 2020 and 2021 to 20 days in 2022, reflecting a longer time taken to settle payables during that year. Subsequently, this period shortened to 18 days in both 2023 and 2024. This reduction indicates a quicker payment cycle in the most recent years, consistent with the upward movement seen in the payables turnover ratio.

Overall Insight

The relationship between the payables turnover ratio and the average payables payment period confirms a moderate fluctuation in payment practices over the timeframe. The initial extension of the payment period in 2022 corresponded with a decreased turnover ratio, while the improved turnover ratio and shortened payment period in 2023 and 2024 suggest enhanced liquidity management and stronger supplier payment performance in the later years.

Average Inventory Processing Period

The average inventory processing period shows a consistent downward trend over the five-year span. It decreased from 31 days in 2020 to 21 days in 2024, indicating a steady improvement in inventory turnover and operational efficiency.

Average Receivable Collection Period

The average receivable collection period exhibits stability between 2020 and 2022, remaining around 30 to 31 days. However, it increased notably in 2023 and remained elevated through 2024 at 36 days, suggesting a lengthening in the time taken to collect receivables, which may influence cash flow timing.

Average Payables Payment Period

The average payables payment period remained relatively steady, fluctuating slightly between 18 and 20 days. Starting at 19 days in 2020 and 2021, it peaked at 20 days in 2022 before decreasing back to 18 days in 2023 and 2024. This indicates consistent payment practices to suppliers without significant extension or compression.

Cash Conversion Cycle

The cash conversion cycle decreased from 42 days in 2020 to a low of 37 days in 2022, reflecting improved cash flow management during this period. Nonetheless, it increased again to 40 days in 2023 and slightly decreased to 39 days in 2024, indicating some volatility but remaining overall better than the initial value in 2020.