Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Long-term Activity Ratios (Summary)
Edwards Lifesciences Corp., long-term (investment) activity ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The analysis of long-term investment activity ratios from 2017 to 2021 reveals a general decline in the efficiency with which assets and equity are utilized to generate revenue. While total asset utilization remained relatively stable, there is a pronounced downward trend in the turnover of fixed assets and equity.
- Net Fixed Asset Turnover
- A significant decline is observed in the net fixed asset turnover, which fell from 5.05 in 2017 to 3.38 in 2021. When incorporating operating lease right-of-use assets, the ratio decreased from 5.05 to 3.19 over the same period. This downward trend suggests that the expansion of the company's fixed asset base has outpaced its revenue growth, resulting in lower productivity per unit of long-term physical investment.
- Total Asset Turnover
- The total asset turnover ratio remained comparatively stable, fluctuating within a narrow range between 0.60 in 2017 and a peak of 0.70 in 2018, before ending at 0.62 in 2021. This indicates that the overall asset base, including current assets, has been managed with consistent efficiency despite the deterioration in fixed asset turnover.
- Equity Turnover
- A persistent downward trajectory is noted in the equity turnover ratio, which declined from 1.16 in 2017 to 0.90 in 2021. This trend indicates a reduction in the amount of revenue generated for every dollar of shareholder equity, potentially reflecting an accumulation of equity that has not been matched by a proportional increase in top-line growth.
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Net Fixed Asset Turnover
Edwards Lifesciences Corp., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 5,232,500) | 4,386,300) | 4,348,000) | 3,722,800) | 3,435,300) | |
| Property, plant, and equipment, net | 1,546,600) | 1,395,200) | 1,060,300) | 867,500) | 679,700) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 3.38 | 3.14 | 4.10 | 4.29 | 5.05 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Abbott Laboratories | 4.81 | — | — | — | — | |
| Elevance Health Inc. | 34.94 | — | — | — | — | |
| Intuitive Surgical Inc. | 3.04 | — | — | — | — | |
| Medtronic PLC | 5.77 | — | — | — | — | |
| UnitedHealth Group Inc. | 31.81 | — | — | — | — | |
| Net Fixed Asset Turnover, Sector | ||||||
| Health Care Equipment & Services | 17.31 | — | — | — | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Health Care | 7.74 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net fixed asset turnover = Net sales ÷ Property, plant, and equipment, net
= 5,232,500 ÷ 1,546,600 = 3.38
2 Click competitor name to see calculations.
An analysis of the long-term activity ratios reveals a consistent expansion of the asset base that has outpaced the growth of net sales, resulting in a general decline in the efficiency of fixed asset utilization over the five-year period. While net sales demonstrate a positive upward trajectory, the aggressive increase in net property, plant, and equipment has exerted downward pressure on the net fixed asset turnover ratio.
- Net Sales Trend
- Revenue experienced steady growth, rising from US$ 3.44 billion in 2017 to US$ 5.23 billion in 2021. This represents a significant overall increase, with a particularly strong expansion observed between 2020 and 2021, where sales grew from US$ 4.39 billion to US$ 5.23 billion.
- Fixed Asset Investment
- Net property, plant, and equipment grew substantially and continuously throughout the period. Investment in fixed assets increased from US$ 679.7 million in 2017 to US$ 1.55 billion by the end of 2021. The rate of investment acceleration was most pronounced between 2019 and 2020, during which the asset base expanded by approximately 31.5%.
- Net Fixed Asset Turnover Analysis
- The net fixed asset turnover ratio declined from 5.05 in 2017 to a low of 3.14 in 2020, before recovering slightly to 3.38 in 2021. This downward trend indicates that for every dollar invested in net fixed assets, the company generated fewer dollars in sales over time. The decline suggests that the capacity expansion and capital expenditures implemented between 2017 and 2020 did not yield an immediate proportional increase in revenue.
- Efficiency Correlation
- The divergence between the growth rates of net sales and net fixed assets explains the contraction of the turnover ratio. While sales increased by approximately 52% over the period, net fixed assets increased by approximately 128%. The slight uptick in the ratio in 2021 suggests a potential stabilization or the beginning of a phase where newly acquired assets are starting to contribute more effectively to top-line revenue growth.
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Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Edwards Lifesciences Corp., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 5,232,500) | 4,386,300) | 4,348,000) | 3,722,800) | 3,435,300) | |
| Property, plant, and equipment, net | 1,546,600) | 1,395,200) | 1,060,300) | 867,500) | 679,700) | |
| Operating lease right-of-use assets | 92,100) | 94,200) | 80,100) | —) | —) | |
| Property, plant, and equipment, net (including operating lease, right-of-use asset) | 1,638,700) | 1,489,400) | 1,140,400) | 867,500) | 679,700) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 3.19 | 2.95 | 3.81 | 4.29 | 5.05 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Abbott Laboratories | 4.26 | — | — | — | — | |
| Elevance Health Inc. | 30.12 | — | — | — | — | |
| Intuitive Surgical Inc. | 2.93 | — | — | — | — | |
| Medtronic PLC | 4.84 | — | — | — | — | |
| UnitedHealth Group Inc. | 21.54 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Health Care Equipment & Services | 13.89 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Health Care | 6.75 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Net sales ÷ Property, plant, and equipment, net (including operating lease, right-of-use asset)
= 5,232,500 ÷ 1,638,700 = 3.19
2 Click competitor name to see calculations.
The analysis of investment activity reveals a period of significant capital expansion relative to revenue growth between 2017 and 2021.
- Net Sales and Asset Accumulation
- Net sales exhibited a consistent upward trajectory, increasing from 3,435,300 thousand US dollars in 2017 to 5,232,500 thousand US dollars by 2021. During the same period, net property, plant, and equipment, including right-of-use assets, grew at a more aggressive rate, rising from 679,700 thousand US dollars to 1,638,700 thousand US dollars.
- Net Fixed Asset Turnover Performance
- A persistent decline in the net fixed asset turnover ratio is observed from 2017 through 2020, falling from 5.05 to 2.95. This downward trend indicates that the growth in the asset base outpaced the growth in sales. A slight reversal of this trend occurred in 2021, as the ratio improved to 3.19.
- Investment Efficiency Implications
- The reduction in the turnover ratio suggests a period of heavy investment in infrastructure and right-of-use assets that did not immediately yield proportional increases in revenue. The trough in 2020 followed by the modest recovery in 2021 indicates a possible transition toward better utilization of the expanded asset base to drive top-line growth.
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Total Asset Turnover
Edwards Lifesciences Corp., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 5,232,500) | 4,386,300) | 4,348,000) | 3,722,800) | 3,435,300) | |
| Total assets | 8,502,600) | 7,237,100) | 6,488,100) | 5,323,700) | 5,695,800) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.62 | 0.61 | 0.67 | 0.70 | 0.60 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Abbott Laboratories | 0.57 | — | — | — | — | |
| Elevance Health Inc. | 1.41 | — | — | — | — | |
| Intuitive Surgical Inc. | 0.42 | — | — | — | — | |
| Medtronic PLC | 0.32 | — | — | — | — | |
| UnitedHealth Group Inc. | 1.34 | — | — | — | — | |
| Total Asset Turnover, Sector | ||||||
| Health Care Equipment & Services | 1.02 | — | — | — | — | |
| Total Asset Turnover, Industry | ||||||
| Health Care | 0.62 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Total asset turnover = Net sales ÷ Total assets
= 5,232,500 ÷ 8,502,600 = 0.62
2 Click competitor name to see calculations.
Analysis of the investment activity ratios indicates a period of sustained top-line growth accompanied by an expanding asset base, resulting in a total asset turnover ratio that remained relatively stable despite fluctuations.
- Net Sales Growth
- A consistent upward trajectory in net sales is observed from 2017 through 2021. Revenue increased from US$ 3,435,300 thousand to US$ 5,232,500 thousand, demonstrating steady growth in market reach or pricing power over the five-year period.
- Asset Base Expansion
- Total assets experienced a slight decrease in 2018 but subsequently entered a phase of significant expansion. Assets rose from US$ 5,323,700 thousand in 2018 to US$ 8,502,600 thousand by the end of 2021, indicating substantial investment in the company's resource base.
- Total Asset Turnover Dynamics
- The total asset turnover ratio peaked at 0.70 in 2018, a result of increasing sales coinciding with a reduction in total assets. Following this peak, the ratio declined to 0.67 in 2019 and further to 0.61 in 2020, before stabilizing at 0.62 in 2021. This trend suggests that after 2018, the growth in the asset base outpaced the growth in net sales, leading to a moderate decrease in the efficiency of asset utilization relative to revenue generation.
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Equity Turnover
Edwards Lifesciences Corp., equity turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 5,232,500) | 4,386,300) | 4,348,000) | 3,722,800) | 3,435,300) | |
| Stockholders’ equity | 5,835,900) | 4,574,300) | 4,148,300) | 3,140,400) | 2,956,200) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 0.90 | 0.96 | 1.05 | 1.19 | 1.16 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Abbott Laboratories | 1.20 | — | — | — | — | |
| Elevance Health Inc. | 3.80 | — | — | — | — | |
| Intuitive Surgical Inc. | 0.48 | — | — | — | — | |
| Medtronic PLC | 0.59 | — | — | — | — | |
| UnitedHealth Group Inc. | 3.98 | — | — | — | — | |
| Equity Turnover, Sector | ||||||
| Health Care Equipment & Services | 2.42 | — | — | — | — | |
| Equity Turnover, Industry | ||||||
| Health Care | 1.67 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Equity turnover = Net sales ÷ Stockholders’ equity
= 5,232,500 ÷ 5,835,900 = 0.90
2 Click competitor name to see calculations.
Between 2017 and 2021, a divergent trend is observed between the growth of net sales and the expansion of the equity base, resulting in a consistent decline in equity turnover efficiency following a brief peak in 2018.
- Net Sales Performance
- Total net sales exhibited a consistent upward trajectory, rising from 3,435,300 thousand USD in 2017 to 5,232,500 thousand USD in 2021. Significant growth was noted particularly in 2019 and 2021, demonstrating a steady increase in market revenue over the five-year period.
- Stockholders' Equity Expansion
- The equity base grew substantially, moving from 2,956,200 thousand USD in 2017 to 5,835,900 thousand USD by 2021. The rate of equity accumulation accelerated significantly after 2018, nearly doubling the company's equity position by the end of the analyzed period.
- Equity Turnover Efficiency
- The equity turnover ratio increased slightly from 1.16 in 2017 to a peak of 1.19 in 2018, but subsequently declined every year, reaching 0.90 by 2021. This downward trend indicates that the growth in stockholders' equity outpaced the growth in net sales. The transition of the ratio from above 1.0 to below 1.0 signifies a reduction in the efficiency with which the company utilizes its equity to generate revenue.
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