Edwards Lifesciences Corp. (NYSE:EW)

The financial indicators demonstrate several notable trends over the examined periods.

Inventory Turnover

The inventory turnover ratio exhibited slight fluctuations, generally oscillating between 1.35 and 1.74. A peak of 1.74 was observed in late 2019, followed by a gradual decline through 2020 to a low of 1.35. Subsequently, it showed a recovery trend into 2021, reaching 1.72 by the end of the year. This pattern suggests variations in the efficiency of inventory management, with some reduction in turnover during 2020, possibly reflecting operational disruptions, followed by improvement in 2021.

Receivables Turnover

Receivables turnover data, available only from late 2020 onwards, indicates a relatively stable collection efficiency, ranging from 7.63 to 8.99. This stability suggests consistent effectiveness in credit collection processes during this period.

Payables Turnover

Limited data points show a significant decrease in payables turnover from 8.86 to 6.11 towards the latter part of the examined period. This decline implies a lengthening in payment cycles to suppliers, potentially reflecting strategic changes in working capital management or external factors affecting payment timings.

Working Capital Turnover

The working capital turnover ratio fluctuated modestly, with values generally ranging from approximately 2.0 to 2.64. The highest turnover was recorded at the end of 2018, with a dip through 2020 but a noticeable improvement toward the end of 2021. This indicates periods of enhanced and reduced efficiency in utilizing working capital to generate revenue, with recent trends pointing to more effective use.

Average Inventory Processing Period

There was a clear rise in the average inventory processing period from 234 days in early 2018 to a peak around 271 days by late 2020, indicating that inventory was held longer over this timeframe. From early 2021 onwards, the period steadily declined to 212 days by year-end, suggesting a shortening inventory cycle and improvement in turnover speed.

Average Receivable Collection Period

Receivables collection days ranged between 41 and 48 days, showing a slight downward trend in 2021. This reduction points to more efficient collection of receivables, potentially enhancing liquidity.

Operating Cycle

The operating cycle demonstrated improvement, decreasing from 314 days to 253 days during the latest periods. This contraction reflects combined positive effects of inventory and receivables management, resulting in quicker conversion of inputs into cash.

Average Payables Payment Period

This metric saw an increase from 41 days to 60 days in available data, indicating slower payments to suppliers. This extension could be a strategic move to optimize cash flow or a response to external financial pressures.

Cash Conversion Cycle

The cash conversion cycle improved from 220 days down to 193 days, signifying a reduction in the net time between cash outflow and inflow. This points to enhanced operational efficiency and cash management in recent quarters.

The financial data reveals notable trends in the cost of sales, inventories, and inventory turnover ratio over the observed periods. The analysis highlights fluctuations and underlying patterns indicative of operational and inventory management dynamics.

Cost of Sales

The cost of sales showed moderate fluctuations throughout the years. Initially, it remained relatively stable around the 230,000 US$ thousand mark in 2018, with a slight peak reaching above 304,000 US$ thousand in the middle of 2019. During 2020, the cost of sales experienced volatility, decreasing in the second quarter but rising again by the end of the year. The upward trend continued into 2021 with peaks surpassing 330,000 US$ thousand mid-year and subsequently stabilizing just above 300,000 US$ thousand by the year's end. This pattern suggests seasonal or operational variability, with the latter years showing an overall increased cost base compared to 2018.

Inventories

Inventories displayed a consistent increase over the entire period. Starting from approximately 574,000 US$ thousand at the beginning of 2018, inventories gradually rose, crossing 630,000 US$ thousand by early 2019, and significantly increasing to over 800,000 US$ thousand by the end of 2020. Although there was a slight dip in mid-2021, inventory levels remained elevated, maintaining a range between 726,700 and 767,900 US$ thousand. This upward trajectory may reflect increased production, stockpiling, or strategic inventory accumulation to meet anticipated demand or supply chain considerations.

Inventory Turnover Ratio

The inventory turnover ratio exhibited variability, oscillating in a range from about 1.35 to 1.74 across the periods. Early in the timeline, turnover ratios were relatively higher, around 1.56 to 1.63, dipped slightly during late 2018 and 2019, then declined further in the first three quarters of 2020, reaching the lowest values near 1.35. A recovery trend is visible starting from the fourth quarter of 2020, with turnover improving steadily throughout 2021 and reaching the highest figure of 1.72 by the end of the year. This progression indicates an initial slowdown in inventory movement followed by enhanced efficiency or higher sales rates relative to inventory levels by the most recent periods.

Overall, the cost of sales increases coupled with rising inventory levels suggest potential scaling in operations or changing cost structures. The movement in inventory turnover ratios supports the interpretation of evolving inventory management efficiency, which appears to improve after a period of reduced rotation speed during 2020. These trends may warrant further investigation into supply chain, production planning, and sales execution to optimize working capital and profitability.

Net Sales

The net sales exhibited a generally increasing trend from March 2018 through December 2019, rising from approximately 895 million USD to around 1.17 billion USD. This steady growth was followed by a notable dip during the first half of 2020, where sales fell from roughly 1.13 billion USD in March 2020 to 925 million USD in June 2020, likely indicative of external challenges during this period. Subsequently, sales rebounded and recovered strongly through 2021, achieving a peak of approximately 1.38 billion USD in June 2021 before slightly declining by the end of the year to around 1.33 billion USD. Overall, the data reflect resilience and recovery after a mid-2020 downturn.

Accounts Receivable (Net of Allowances)

Available data from September 2020 onward demonstrate fluctuations in accounts receivable. Starting at approximately 550 million USD, the balance declined to around 515 million USD in the following quarter, before increasing continuously to a high of around 640.5 million USD by December 2020. In 2021, it showed some volatility but remained within a range of roughly 582 million to 601 million USD. This pattern suggests variable collection timing or credit terms over the analyzed quarters, without a consistent upward or downward trend.

Receivables Turnover Ratio

The receivables turnover ratio for the reported periods varied between approximately 7.63 and 8.99. The ratio declined to its lowest point at about 7.63 in September 2020, followed by a moderate improvement through December 2021, reaching close to 9. An increasing turnover ratio generally signifies more efficient collection of receivables, reflecting improved liquidity management during the latter part of the analyzed period.

Cost of Sales

The cost of sales exhibits a fluctuating pattern over the observed periods. Initially, from March 2018 through December 2018, costs remain relatively stable, ranging between approximately 224,900 to 246,200 thousand USD. An upward trend emerges in 2019, with a notable increase reaching a peak of around 304,000 thousand USD in June 2019. Subsequently, costs slightly decrease but maintain elevated levels up to the end of 2019.
In 2020, cost of sales shows variability; there is a significant dip in June 2020 to about 238,200 thousand USD, followed by a rise towards the end of the year, reaching 296,300 thousand USD in December 2020. This pattern suggests seasonality or operational adjustments within the year.
The first three quarters of 2021 show relatively high costs, peaking at 334,300 thousand USD in June before slightly tapering off in the final quarter. Overall, the cost of sales trend reflects increased expenses over time with marked quarterly fluctuations that could be influenced by production volume, input costs, or market conditions.

Accounts Payable

Data on accounts payable is only available for the last two quarters of 2021, showing a significant increase from 139,500 thousand USD to 204,500 thousand USD. This sharp rise could indicate a strategic shift in payment management, possibly extended payment terms or increased procurement on credit. The absence of earlier data limits the ability to assess longer-term trends.

Payables Turnover Ratio

The payables turnover ratio is also reported only for the final two quarters of 2021, declining from 8.86 to 6.11. This reduction suggests that the company is taking longer to pay its suppliers on average, which aligns with the observed increase in accounts payable balances. A lower turnover ratio may reflect a deliberate cash flow management strategy or delays in payments.

The financial analysis reveals several notable trends and patterns in the working capital, net sales, and working capital turnover over the observed periods.

Working Capital

Working capital exhibited an overall increasing trend from the beginning of the period in March 2018 through the end of 2021, despite some fluctuations. Initially, working capital was approximately 1,402,400 thousand US dollars and rose steadily to a peak around December 2021, approaching 2,549,000 thousand US dollars. A slight decline was observed in the final quarter, falling to about 2,148,400 thousand US dollars. The growth trajectory suggests an expansion in current assets relative to current liabilities, reflecting improving liquidity positions over time.

Net Sales

Net sales showed variability but maintained an overall upward orientation. Starting at 894,800 thousand US dollars in March 2018, sales increased gradually, reaching multiple peaks. A significant rise was seen around mid-2021, with sales climbing to approximately 1,376,000 thousand US dollars. The data also shows some seasonal fluctuations; for example, a dip in sales occurred in mid-2020, likely reflecting external disruptions during that period. However, recovery was evident by the end of 2021, with sales stabilizing at roughly 1,329,700 thousand US dollars in December.

Working Capital Turnover

The working capital turnover ratio, which measures sales generated per unit of working capital, demonstrated a generally declining trend over the initial part of the period before showing signs of recovery. The ratio started at 2.46 in March 2018, decreased to a low around 2.00 during late 2020 and early 2021, indicating reduced efficiency in utilizing working capital to generate sales. However, by the end of 2021, the ratio improved again to approximately 2.44, suggesting enhanced operational efficiency in leveraging working capital to support sales.

Interrelationships and Insights

The upward movement in working capital coupled with fluctuating net sales indicates that the company was investing more into current assets, potentially to support growth or address operational needs. While rising working capital typically dilutes turnover, the late-period improvement in the turnover ratio points to better management or increased sales productivity. The fluctuations in sales, particularly the mid-2020 dip and subsequent recovery, likely reflect market or economic conditions impacting performance temporarily but followed by rebound growth.

Inventory Turnover Trend

The inventory turnover ratio exhibited moderate fluctuations over the examined periods. Starting at 1.56 in March 2018, it increased slightly to peak at 1.74 in December 2019. This upward trend indicates an improvement in the efficiency of inventory management up to the end of 2019. However, during 2020, the ratio declined to a low of 1.35 in December, signaling a slowdown in inventory movement, potentially due to external disruptions affecting sales or supply chains. Subsequently, in 2021, the ratio showed signs of recovery, climbing back to 1.72 by December, nearing pre-pandemic levels.

Average Inventory Processing Period

The average inventory processing period, expressed in days, generally mirrored the inverse pattern of the inventory turnover. Starting at 234 days in March 2018, the metric decreased to approximately 210 days by the end of 2019, indicating faster inventory turnover. In 2020, the processing period extended significantly, reaching a maximum of 271 days in September, which aligns with the reduced turnover ratio observed during the same period. This increase suggests elongated inventory holding times, possibly due to reduced demand or logistical challenges. In 2021, the processing period contracte,d moving toward 212 days by December, reflecting an improvement in inventory circulation as operational conditions normalized.

Overall Insights

The data reflects a cyclical pattern influenced likely by broader market or operational conditions. The initial incremental improvement in inventory efficiency prior to 2020 was interrupted during the pandemic year, as evidenced by reduced turnover and prolonged processing durations. The partial rebound in 2021 signals a recovery phase, with inventory management approaching prior levels of efficiency. Continued monitoring is advisable to confirm the sustainability of these improvements.

Receivables Turnover

The receivables turnover ratio showed an upward trend starting from the first available data in the third quarter of 2020. It increased from 7.95 in Q3 2020 to a peak of 8.99 by Q2 2021, indicating an improvement in the efficiency of the company’s credit and collection processes. The ratio’s movement suggests the company has been increasingly successful in converting receivables into cash more frequently over this period.

Average Receivable Collection Period

The average receivable collection period did not have data available until Q3 2020. From then, it exhibited a decreasing trend from 46 days in Q3 2020 to 41 days by Q2 2021. This reduction in the collection period implies faster receipt of payments from customers. The inverse relationship between receivables turnover and collection period is consistent, as the collection period shortened while the turnover ratio increased.

Average Inventory Processing Period

The average inventory processing period exhibited some fluctuations between March 2018 and December 2021. Initially, it ranged from 210 to 246 days, peaking around early 2019. A notable increase was observed in mid to late 2020, reaching a maximum of approximately 271 days in the third quarter, indicating slower inventory turnover during this period. Following this peak, the period consistently decreased throughout 2021, ending near 212 days by December 2021, suggesting an improvement in inventory management and more efficient processing toward the end of the timeline.

Average Receivable Collection Period

Data for the average receivable collection period became available from September 2020 onward. During this time frame, the period remained relatively stable, fluctuating slightly between 41 and 48 days. There was a mild downward trend from a high of 48 days in September 2020 toward lower values around 41 days by the third quarter of 2021. This indicates a gradual improvement in receivables management, with faster collection of outstanding accounts over the noted periods.

Operating Cycle

The operating cycle was recorded starting in September 2020. It demonstrated a steady decline from approximately 314 days in the third quarter of 2020 to about 253 days by the third quarter of 2021. This shortening of the operating cycle suggests enhanced operational efficiency, reflecting the combined effects of improved inventory turnover and quicker receivables collection over the analyzed intervals.

Payables Turnover

The payables turnover ratio showed a notable decline between the last two recorded quarters. In the quarter ending March 31, 2021, the ratio was 8.86, which decreased to 6.11 in the quarter ending June 30, 2021. This drop indicates a slowdown in the frequency of payments made to suppliers during this period.

Average Payables Payment Period

Correspondingly, the average payables payment period increased from 41 days in the quarter ending March 31, 2021, to 60 days by June 30, 2021. This trend suggests that the company took longer to settle its payables in the most recent quarter, which may be indicative of changes in cash management strategies or payment terms with suppliers.

Overall Trend

The observed data across the final two quarters imply a shift towards extended payment timelines. This change could have implications for supplier relations and working capital management and warrants further monitoring to assess its impact on the company's liquidity and operational efficiency.

Inventory Management

The average inventory processing period exhibited fluctuations over the observed quarters. Initially, it decreased from 234 days in March 2018 to 210 days by September and December 2019, indicating improved inventory turnover. However, this trend reversed, reaching a peak of 271 days in December 2020, suggesting slower inventory processing during this period. Subsequently, the inventory days declined steadily, falling to 212 days by December 2021, reflecting a return to more efficient inventory handling.

Receivables Collection

Data on the average receivable collection period became available starting in September 2020, showing a range between 41 and 48 days through December 2021. The collection periods remained relatively stable, with a slight improvement indicated by a decrease from 48 days in September 2020 to 41 days by December 2021, suggesting enhanced efficiency in collecting receivables.

Payables Payment

The average payables payment period data appeared late in the series, recorded only for September and December 2021. The payment period increased substantially from 41 days to 60 days, indicating the company extended its payables cycle, potentially to manage cash outflows more effectively in the short term.

Cash Conversion Cycle

The cash conversion cycle was available only in the latter part of the dataset for September and December 2021. It showed a decrease from 220 days to 193 days, reflecting an overall improvement in the company’s working capital management by shortening the time between outlay and cash recovery.

Overall Working Capital Trends

The combined analysis of inventory, receivables, and payables indicates an initial period of increasing inventory processing days, which may have pressured working capital. In the most recent quarters, improvements in receivable collection and an extended payables payment period led to a significant decrease in the cash conversion cycle. This trend demonstrates enhanced operational efficiency and liquidity management during the last observed year.