Edwards Lifesciences Corp. (NYSE:EW)

The analysis of financial turnover ratios and cycle periods over the five-year span reveals several significant trends and operational dynamics.

Inventory Turnover

The inventory turnover ratio exhibits moderate fluctuations, starting at 1.58 in 2017, slightly declining to 1.55 in 2018, then increasing to 1.74 in 2019. It sees a substantial decline to 1.35 in 2020, followed by a recovery to 1.72 in 2021. This pattern suggests variability in inventory management efficiency, with a notable slowdown in turnover during 2020, possibly reflecting operational disruptions.

Receivables Turnover

The receivables turnover ratio remains relatively stable, fluctuating in a narrow range from 8.15 in 2017 and 2018, slightly decreasing to 8.00 in 2019, before improving to 8.52 and 8.99 in 2020 and 2021 respectively. This indicates consistent or improving effectiveness in collecting receivables over the period.

Payables Turnover

The payables turnover shows a steady decline from 7.51 in 2017 to 5.5 in 2020, with a mild rebound to 6.11 in 2021. This suggests that the company has been extending its payment terms over time, paying suppliers more slowly, especially noticeable through 2020.

Working Capital Turnover

Working capital turnover decreases consistently from 3.04 in 2017 to 2.0 in 2020, then improves to 2.44 in 2021. This declining trend until 2020 suggests declining efficiency in using working capital to generate sales, with partial recovery in the last year.

Average Inventory Processing Period (Days)

The period shows variability with an increase from 231 days in 2017 to 236 days in 2018, a drop to 210 in 2019, a sharp rise to 271 in 2020, then a decrease to 212 in 2021. The elevated figure in 2020 indicates slower inventory turnover, consistent with the dip in inventory turnover ratio seen that year.

Average Receivable Collection Period (Days)

This metric remains fairly stable, starting and staying around 45 days from 2017 to 2019, then improving to 43 days in 2020 and further to 41 days in 2021. This indicates a slight improvement in the speed of receivables collection.

Operating Cycle (Days)

The operating cycle mirrors inventory and receivables period trends, fluctuating between 253 and 314 days. It peaks at 314 days in 2020 before dropping to 253 days in 2021, reflecting slower operations in 2020 but recovery in 2021.

Average Payables Payment Period (Days)

The average payables payment period steadily increases from 49 days in 2017 to 66 days in 2020, followed by a decline to 60 days in 2021. This confirms the earlier observation of lengthening payment periods to suppliers over time, particularly marked in 2020.

Cash Conversion Cycle (Days)

The cash conversion cycle closely follows the operating cycle changes, ranging from a high of 248 days in 2020 to a low of 193 days in 2021. The elevated cycle in 2020 reflects slower cash recovery from operations during that year, with improvement seen afterward.

Cost of Sales

The cost of sales exhibited an overall upward trend from 2017 to 2021. Starting at 875.3 million USD in 2017, it increased each year except for a slight decline in 2020, reaching 1.2489 billion USD in 2021. This indicates generally rising production or procurement costs, with a minor dip during 2020 possibly reflecting operational adjustments or external market factors during that year.

Inventories

Inventory levels increased steadily from 554.9 million USD in 2017 to a peak of 802.3 million USD in 2020 before decreasing to 726.7 million USD in 2021. This pattern suggests a buildup of stock over the first four years, followed by a reduction in the final year, which may indicate improved inventory management or sales performance adjustments during 2021.

Inventory Turnover

The inventory turnover ratio showed fluctuations over the period. Beginning at 1.58 in 2017, it slightly decreased in 2018 to 1.55, increased to 1.74 in 2019, dropped significantly to 1.35 in 2020, and then rose again to 1.72 in 2021. The decrease in 2020 reflects slower turnover of inventory, possibly due to reduced sales or increased stock levels, while the recovery in 2021 points towards more efficient inventory utilization or a rebound in sales activity.

The financial data reveals a consistent upward trend in net sales over the five-year period. Net sales increased from approximately $3.44 billion in 2017 to $5.23 billion in 2021, indicating steady revenue growth each year. This progression demonstrates the company’s ability to expand its market presence or increase sales volume at a significant pace, with a notable acceleration in the last two years.

Accounts receivable, net of allowances, also exhibited a rising trend from $421.6 million in 2017 to $582.2 million in 2021. However, the growth in receivables did not increase proportionally to net sales, which suggests improved management of credit or more efficient collection processes relative to sales growth in some years.

Receivables turnover

This ratio fluctuated mildly over the analyzed timeframe, starting and remaining near 8.15 in 2017 and 2018, dipping slightly to 8.0 in 2019, then improving to 8.52 in 2020, and further to 8.99 in 2021. An increasing receivables turnover indicates that the company was able to collect its receivables more quickly in the most recent years, correlating with an effective working capital management and possibly favorable credit policies.

Overall, the company shows solid revenue growth accompanied by moderately improved efficiency in receivables collection. The combination of increased net sales and enhanced turnover ratio suggests a positive operational performance with effective management of the accounts receivable cycle.

Cost of sales

The cost of sales exhibited an overall increasing trend from 2017 to 2021. Beginning at $875.3 million in 2017, the value rose steadily each year, reaching $1.2489 billion in 2021. A significant increase occurred between 2018 and 2019, where the cost rose by approximately $174 million. A slight decline was observed in 2020, with a drop of around $33 million compared to the previous year, followed by a notable increase again in 2021.

Accounts payable

Accounts payable also showed a consistent upward trajectory over the analyzed period. The balance increased from $116.6 million in 2017 to $204.5 million in 2021. The largest year-over-year increase happened between 2018 and 2019, rising by roughly $46.4 million. Growth continued steadily into 2020 and 2021, albeit at a slower pace.

Payables turnover ratio

The payables turnover ratio demonstrated a declining trend from 2017 to 2020, starting at 7.51 in 2017 and decreasing to 5.5 in 2020. This indicates the company took longer to pay its suppliers over time. In 2021, the ratio increased to 6.11, suggesting a partial reversal of this trend and a quicker rate of payment compared to the previous year.

Working Capital

The working capital demonstrated a consistent upward trend from 2017 to 2020, increasing from approximately 1.13 billion US dollars to about 2.20 billion US dollars. However, in 2021, there was a slight decline to around 2.15 billion US dollars, indicating a marginal reduction after several years of growth.

Net Sales

Net sales showed a steady increase over the five-year period, rising from approximately 3.44 billion US dollars in 2017 to 5.23 billion US dollars in 2021. This suggests robust sales growth, with the most notable increase occurring in 2021, reflecting strong revenue expansion.

Working Capital Turnover

The working capital turnover ratio exhibited a declining trend from 3.04 in 2017 to 2.00 by 2020, indicating that the company's efficiency in using working capital to generate sales was decreasing during this period. However, in 2021, this ratio rose to 2.44, suggesting an improvement in working capital efficiency relative to sales in the most recent year.

Inventory Turnover

The inventory turnover ratio exhibits variability over the analyzed period. It starts at 1.58 in 2017, slightly decreases to 1.55 in 2018, then rises to 1.74 in 2019. In 2020, the ratio declines noticeably to 1.35, followed by a recovery in 2021, reaching 1.72. This fluctuation suggests changes in the efficiency of inventory management, with a marked dip in turnover during 2020 and a return to stronger turnover by the end of 2021.

Average Inventory Processing Period

The average inventory processing period, measured in days, mirrors the inverse movements observed in the inventory turnover ratio. It increases from 231 days in 2017 to 236 days in 2018, then decreases to 210 days in 2019. In 2020, the period extends significantly to 271 days, indicating slower inventory movement, before reducing again to 212 days in 2021. This pattern reinforces the observation that inventory was managed less efficiently during 2020, likely reflecting operational challenges, with improvement seen in the following year.

Receivables Turnover

The receivables turnover ratio remained relatively stable from 2017 through 2019, with values around 8.0 to 8.15. Starting in 2020, there was a noticeable improvement, increasing from 8.52 in 2020 to 8.99 in 2021. This suggests an increasing efficiency in collecting receivables over time, particularly in the more recent periods.

Average Receivable Collection Period

The average collection period showed a declining trend over the analyzed years. Maintaining at 45 days between 2017 and 2018, it slightly increased to 46 days in 2019 but then decreased to 43 days in 2020 and further improved to 41 days in 2021. This decline indicates that on average, receivables were collected faster in 2020 and 2021 compared to earlier years.

Overall Trend and Insight

The data indicates an improvement in receivables management efficiency over the five-year period. The upward trend in receivables turnover ratio coupled with the shortening average collection period signals a strengthening in the company's ability to convert receivables into cash promptly. This positive trend may contribute to improved liquidity and working capital management.

The financial data reveals several notable trends in the company's operating efficiency over the observed five-year period.

Average inventory processing period

The inventory processing period exhibited fluctuations throughout the period. It increased slightly from 231 days in 2017 to 236 days in 2018, then decreased to 210 days in 2019. A significant rise occurred in 2020, reaching 271 days, followed by a considerable reduction to 212 days in 2021. This pattern indicates variability in inventory turnover efficiency, with a notable slowdown in 2020 before improvement in the subsequent year.

Average receivable collection period

The receivable collection period remained relatively stable, with a gradual decline over the years. Starting at 45 days in 2017 and 2018, it slightly increased to 46 days in 2019, then decreased to 43 days in 2020 and further to 41 days in 2021. This trend suggests an improving efficiency in accounts receivable collection, contributing positively to cash flow management.

Operating cycle

The operating cycle closely mirrored the movements in inventory processing and receivable collection periods. It began at 276 days in 2017, rising to 281 days in 2018, then declined to 256 days in 2019. The cycle lengthened significantly to 314 days in 2020, driven primarily by the increased inventory processing period. Subsequently, it contracted sharply to 253 days in 2021, marking the shortest operating cycle within the five-year span, which points to enhanced overall operational efficiency.

In summary, the company experienced variability in inventory turnover and operating cycle durations, with a peak delay in 2020. The steadily improving receivable collection period and the substantial reduction in the operating cycle in 2021 indicate a positive shift toward more efficient working capital management in the latter part of the period analyzed.

Payables Turnover

The payables turnover ratio shows a declining trend from 7.51 in 2017 to a low of 5.5 in 2020, before experiencing a moderate recovery to 6.11 in 2021. This indicates that the company was paying its suppliers less frequently over the years 2017 to 2020, but slightly increased the rate of payment turnover in 2021.

Average Payables Payment Period

The average payables payment period increased steadily from 49 days in 2017 to 66 days in 2020, followed by a decrease to 60 days in 2021. This reflects a lengthening in the time the company took to settle its payables over the first four years, reaching the longest payment period in 2020, then partially reversing this trend in the last reported year.

Overall Analysis

The inverse relationship observed between the payables turnover ratio and the average payment period aligns with typical financial behavior; as the company extends the time taken to pay suppliers, the turnover ratio declines. The trends suggest a strategic or operational shift towards more extended payment terms or improved working capital management during the period, particularly marked by a significant extension through 2020, with a partial normalization in 2021.

Average Inventory Processing Period

The average inventory processing period displayed a fluctuating trend over the five-year period. It started at 231 days in 2017, increased slightly to 236 days in 2018, then decreased to 210 days in 2019. In 2020, there was a notable rise to 271 days, followed by a reduction to 212 days in 2021. This indicates variability in inventory turnover efficiency, with a significant delay occurring in 2020 before improving again the following year.

Average Receivable Collection Period

The average receivable collection period remained relatively stable throughout the period, with minor variation. It held steady at 45 days in both 2017 and 2018, increased slightly to 46 days in 2019, then decreased to 43 days in 2020 and further to 41 days in 2021. This suggests improved effectiveness in collecting receivables over time, especially in the last two years.

Average Payables Payment Period

The average payables payment period showed an increasing trend from 49 days in 2017 to a peak of 66 days in 2020, before decreasing to 60 days in 2021. This indicates that the company extended the period before paying its suppliers over the first four years, particularly in 2020, but slightly shortened this period in 2021.

Cash Conversion Cycle

The cash conversion cycle, representing the net time between cash outflows and inflows, exhibited variability. It remained stable near 227-229 days in 2017 and 2018, decreased significantly to 197 days in 2019, then increased sharply to 248 days in 2020 before dropping to its lowest value of 193 days in 2021. This pattern implies fluctuations in overall working capital efficiency, with a peak inefficiency in 2020 followed by an improvement in 2021.

Summary of Trends

Overall, the data reveal inconsistent working capital management over the analyzed period. Inventory processing and the cash conversion cycle both peaked in 2020, likely indicating operational challenges or strategic shifts during that year. Despite this, the company improved its receivables collection efficiency steadily, while the extension and subsequent contraction of the payables payment period suggest adjustments in supplier payment strategies. The improvements in the cash conversion cycle and receivable collections in 2021 reflect enhanced liquidity and operational efficiency compared to the prior year.