Stock Analysis on Net

HP Inc. (NYSE:HPQ)

This company has been moved to the archive! The financial data has not been updated since August 29, 2019.

Analysis of Short-term (Operating) Activity Ratios 

Microsoft Excel

Short-term Activity Ratios (Summary)

HP Inc., short-term (operating) activity ratios

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Turnover Ratios
Inventory turnover 7.89 7.34 8.75 12.12 13.23 14.29
Receivables turnover 11.44 11.79 11.73 7.73 8.06 7.07
Payables turnover 3.23 3.20 3.53 4.93 5.33 6.16
Working capital turnover 10.77 17.39 23.19
Average No. Days
Average inventory processing period 46 50 42 30 28 26
Add: Average receivable collection period 32 31 31 47 45 52
Operating cycle 78 81 73 77 73 78
Less: Average payables payment period 113 114 103 74 68 59
Cash conversion cycle -35 -33 -30 3 5 19

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).


Inventory Turnover
The inventory turnover ratio exhibited a declining trend over the six-year period, starting from 14.29 in 2013 and decreasing to 7.89 by 2018. This indicates a slowdown in the rate at which the company sold and replaced its inventory, which could suggest either lower sales velocity or increased inventory levels.
Receivables Turnover
Receivables turnover showed some fluctuations but generally improved from 7.07 in 2013 to peak at 11.79 in 2017 before slightly declining to 11.44 in 2018. This suggests an overall improvement in the efficiency of collecting accounts receivables, with faster conversion of credit sales into cash.
Payables Turnover
The payables turnover ratio steadily declined from 6.16 in 2013 to a low of 3.20 in 2017, with a minor increase in 2018 to 3.23. This trend indicates the company took longer to pay its suppliers over time, which may reflect extended payment terms or delayed payments.
Working Capital Turnover
Working capital turnover showed a significant decrease from 23.19 in 2013 to 10.77 in 2015, after which data is unavailable. The downward trend may indicate less efficient use of working capital to generate sales during the observed period.
Average Inventory Processing Period
The average days inventory is held increased from 26 days in 2013 to 50 days in 2017, before slightly decreasing to 46 days in 2018. This confirms the slowdown implied by the inventory turnover ratio and indicates longer holding periods for inventory items.
Average Receivable Collection Period
The average days taken to collect receivables decreased from 52 days in 2013 to 31 days in 2016 and remained stable around that level through 2018. This indicates improvement in cash collections and management of credit policies.
Operating Cycle
The operating cycle fluctuated between 73 and 81 days with no definitive trend. This metric, representing the time between inventory acquisition and cash collection from sales, remained relatively stable despite changes in its components.
Average Payables Payment Period
The average number of days to pay suppliers increased significantly from 59 days in 2013 to over 110 days by 2017 and 2018. This suggests the company extended payment terms or delayed payments to suppliers, potentially improving short-term liquidity at the cost of longer creditor obligations.
Cash Conversion Cycle
The cash conversion cycle decreased dramatically from 19 days in 2013 to negative values from 2016 onwards, reaching negative 35 days in 2018. A negative cash conversion cycle indicates that the company is able to collect cash from customers before it needs to pay its suppliers, reflecting strong working capital management and improving cash flow timing.

Turnover Ratios


Average No. Days


Inventory Turnover

HP Inc., inventory turnover calculation, comparison to benchmarks

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data (US$ in millions)
Cost of revenue 47,803 42,478 39,240 78,596 84,839 86,380
Inventory 6,062 5,786 4,484 6,485 6,415 6,046
Short-term Activity Ratio
Inventory turnover1 7.89 7.34 8.75 12.12 13.23 14.29
Benchmarks
Inventory Turnover, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Inventory turnover = Cost of revenue ÷ Inventory
= 47,803 ÷ 6,062 = 7.89

2 Click competitor name to see calculations.


Cost of Revenue
The cost of revenue demonstrates a notable decline from 2013 to 2016, dropping from 86,380 million USD to 39,240 million USD. This represents a reduction of more than 50%. Following this sharp decrease, there is a gradual increase in the subsequent two years, rising to 47,803 million USD in 2018. This trend suggests a significant change in either the scale of operations, cost management, or revenue recognition policies during the period, with some recovery or expansion after 2016.
Inventory
Inventory levels fluctuate throughout the period, initially increasing slightly from 6,046 million USD in 2013 to 6,485 million USD in 2015. Thereafter, inventory decreases significantly in 2016 to 4,484 million USD but rebounds in the following years, reaching 6,062 million USD in 2018. The reduction in 2016 aligns with the decreased cost of revenue for that year, while the subsequent increase might indicate a buildup in stock or preparation for higher sales volumes.
Inventory Turnover Ratio
The inventory turnover ratio exhibits a consistent downward trend from 14.29 in 2013 to a low of 7.34 in 2017, followed by a slight increase to 7.89 in 2018. This decline points to a slower rate of inventory being sold and replaced over time, which could signify changing operational efficiency, sales pace, or inventory management practices. The slight recovery in 2018 may indicate some improvement in inventory utilization or sales activity.

Receivables Turnover

HP Inc., receivables turnover calculation, comparison to benchmarks

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data (US$ in millions)
Net revenue 58,472 52,056 48,238 103,355 111,454 112,298
Accounts receivable, net 5,113 4,414 4,114 13,363 13,832 15,876
Short-term Activity Ratio
Receivables turnover1 11.44 11.79 11.73 7.73 8.06 7.07
Benchmarks
Receivables Turnover, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Receivables turnover = Net revenue ÷ Accounts receivable, net
= 58,472 ÷ 5,113 = 11.44

2 Click competitor name to see calculations.


Net Revenue
The net revenue demonstrated a declining trend from 2013 to 2016, falling from approximately 112.3 billion US dollars in 2013 to 48.2 billion US dollars in 2016. However, from 2016 onwards, there was a recovery pattern observed, with net revenue increasing to around 58.5 billion US dollars by 2018, indicating a moderate rebound but not reaching the initial levels seen in the early period.
Accounts Receivable, Net
The net accounts receivable showed a consistent decline from 15.9 billion US dollars in 2013 to 4.1 billion US dollars in 2016. Following this drop, there was a slight upward trend from 2016 to 2018, reaching approximately 5.1 billion US dollars. This movement parallels the trend in net revenue, reflecting changes in credit sales or collections.
Receivables Turnover Ratio
The receivables turnover ratio exhibited an improving efficiency until 2016, increasing from 7.07 times in 2013 to a peak of about 11.79 times in 2017. This suggests enhanced collection efficiency over the period despite declining revenue. There was a minor decrease in 2018 to 11.44 times, which still reflects a solid turnover rate relative to earlier years.

Payables Turnover

HP Inc., payables turnover calculation, comparison to benchmarks

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data (US$ in millions)
Cost of revenue 47,803 42,478 39,240 78,596 84,839 86,380
Accounts payable 14,816 13,279 11,103 15,956 15,903 14,019
Short-term Activity Ratio
Payables turnover1 3.23 3.20 3.53 4.93 5.33 6.16
Benchmarks
Payables Turnover, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Payables turnover = Cost of revenue ÷ Accounts payable
= 47,803 ÷ 14,816 = 3.23

2 Click competitor name to see calculations.


Cost of Revenue
The cost of revenue displayed a declining trend from October 2013 to October 2016, dropping from 86,380 million US dollars to 39,240 million US dollars. After this decline, there was a subsequent increase in cost of revenue in the following two years, reaching 47,803 million US dollars by October 2018. This pattern indicates a significant reduction in costs initially, followed by a moderate rise over the last two periods.
Accounts Payable
Accounts payable figures generally increased from 14,019 million US dollars in October 2013 to 15,956 million US dollars in October 2015. Subsequently, a sharp decrease occurred in October 2016, bringing the payable amount down to 11,103 million US dollars. In the next two years, accounts payable rebounded, reaching 14,816 million US dollars by October 2018. This suggests variability in vendor payments or credit terms over the period.
Payables Turnover Ratio
The payables turnover ratio showed a steady decline throughout the period under review, falling from 6.16 in October 2013 to 3.23 by October 2018. This decline indicates that the company was taking longer to pay its suppliers and vendors over time, reflecting changes in payment policies or cash management strategies.

Working Capital Turnover

HP Inc., working capital turnover calculation, comparison to benchmarks

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data (US$ in millions)
Current assets 21,387 22,318 18,468 51,787 50,145 50,364
Less: Current liabilities 25,131 22,412 18,808 42,191 43,735 45,521
Working capital (3,744) (94) (340) 9,596 6,410 4,843
 
Net revenue 58,472 52,056 48,238 103,355 111,454 112,298
Short-term Activity Ratio
Working capital turnover1 10.77 17.39 23.19
Benchmarks
Working Capital Turnover, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Working capital turnover = Net revenue ÷ Working capital
= 58,472 ÷ -3,744 =

2 Click competitor name to see calculations.


Working Capital
The working capital exhibited a rising trend from 2013 to 2015, increasing from 4,843 million US dollars to 9,596 million US dollars. However, from 2016 onwards, the working capital sharply declined, turning negative starting in 2016 with -340 million US dollars, reaching a low of -3,744 million US dollars by 2018. This indicates a significant deterioration in the company's short-term financial health over the latter period.
Net Revenue
Net revenue remained relatively stable during the period from 2013 to 2015, with a slight decline from 112,298 million to 103,355 million US dollars. From 2016 forward, there is a marked decrease in reported revenue figures, dropping to 48,238 million US dollars in 2016 before showing moderate growth in the subsequent two years, rising to 58,472 million US dollars by 2018. This pattern suggests either a substantial business contraction or a change in reporting scope after 2015.
Working Capital Turnover
The working capital turnover ratio decreased steadily from 23.19 in 2013 to 10.77 in 2015, indicating a reduction in efficiency with which the company generated revenue from its working capital. Data are unavailable beyond 2015, which may be related to the company's shift to negative working capital values that would affect the meaningfulness of this ratio.

Average Inventory Processing Period

HP Inc., average inventory processing period calculation, comparison to benchmarks

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data
Inventory turnover 7.89 7.34 8.75 12.12 13.23 14.29
Short-term Activity Ratio (no. days)
Average inventory processing period1 46 50 42 30 28 26
Benchmarks (no. days)
Average Inventory Processing Period, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 7.89 = 46

2 Click competitor name to see calculations.


The financial data exhibits a clear declining trend in inventory turnover from 2013 to 2018, which suggests reduced efficiency in managing inventory over the years. Specifically, the inventory turnover ratio decreased from 14.29 in 2013 to a low point of 7.34 in 2017, with a slight recovery to 7.89 in 2018. This decline indicates that the company turned over its inventory fewer times per year, implying either increased inventory levels or slower sales of inventory.

Conversely, the average inventory processing period shows an increasing trend during the same period, moving from 26 days in 2013 to a peak of 50 days in 2017, followed by a minor improvement to 46 days in 2018. This aligns inversely with the inventory turnover ratio and further confirms that inventory was held longer before being sold.

Inventory Turnover Ratio
Decreased from 14.29 in 2013 to 7.34 in 2017, indicating less frequent inventory turnover.
Saw a modest improvement to 7.89 in 2018, but remained significantly below earlier levels.
Average Inventory Processing Period
Increased from 26 days in 2013 to 50 days in 2017, demonstrating longer holding periods for inventory.
Improved slightly to 46 days in 2018, suggesting attempts to reduce inventory duration.

Overall, the trends reflect a deteriorating inventory management efficiency over the six-year period with some signs of stabilization or recovery in the last year. The inverse relationship between the turnover ratio and the processing period is consistent, indicating that the company may need to continue addressing inventory management practices to optimize operational efficiency and reduce inventory carrying costs.


Average Receivable Collection Period

HP Inc., average receivable collection period calculation, comparison to benchmarks

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data
Receivables turnover 11.44 11.79 11.73 7.73 8.06 7.07
Short-term Activity Ratio (no. days)
Average receivable collection period1 32 31 31 47 45 52
Benchmarks (no. days)
Average Receivable Collection Period, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 11.44 = 32

2 Click competitor name to see calculations.


Receivables Turnover
The receivables turnover ratio demonstrates a general upward trend from 2013 to 2018. Starting at 7.07 in 2013, it increased significantly to 8.06 in 2014, then showed a slight decline to 7.73 in 2015. From 2015 onwards, there was a notable rise, reaching a peak of 11.79 in 2017, followed by a minor decrease to 11.44 in 2018. This pattern indicates an overall improvement in the efficiency of collecting receivables over the period, especially from 2015 through 2018.
Average Receivable Collection Period
The average collection period in days exhibits a declining trend, reflecting faster collection of receivables. Beginning at 52 days in 2013, this metric decreased to 45 days in 2014 and slightly increased to 47 days in 2015. Subsequently, there was a sharp reduction to 31 days in 2016, maintaining this lower collection period in 2017, and slightly increasing to 32 days in 2018. This trend corresponds inversely with the receivables turnover ratio, confirming improved credit management efficiency and quicker cash inflow from receivables during the latter years.
Summary
Across the six-year span, the company enhanced its receivables management, as evidenced by higher turnover ratios and reduced collection periods. The significant improvements from 2015 onwards suggest targeted efforts to optimize working capital. Minor fluctuations in 2015 and 2018 indicate that while the general trend is positive, occasional variability in collection efficiency remains. Overall, the data points to strengthening operational efficiency in accounts receivable processes.

Operating Cycle

HP Inc., operating cycle calculation, comparison to benchmarks

No. days

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data
Average inventory processing period 46 50 42 30 28 26
Average receivable collection period 32 31 31 47 45 52
Short-term Activity Ratio
Operating cycle1 78 81 73 77 73 78
Benchmarks
Operating Cycle, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 46 + 32 = 78

2 Click competitor name to see calculations.


Average inventory processing period
The average inventory processing period shows a general upward trend from 26 days in 2013 to a peak of 50 days in 2017, followed by a slight decline to 46 days in 2018. This indicates that the time taken to process inventory increased significantly between 2013 and 2017, suggesting potential changes in inventory management or product turnover rates during this time frame.
Average receivable collection period
The average receivable collection period fluctuated over the analyzed years. It decreased from 52 days in 2013 to 45 days in 2014, then experienced a minor rise in 2015 to 47 days before declining substantially to 31 days in both 2016 and 2017. A slight increase to 32 days occurred in 2018. Overall, there is a noticeable improvement in receivable collection efficiency starting from 2015 onwards.
Operating cycle
The operating cycle remained relatively stable throughout the period with minor fluctuations. It decreased from 78 days in 2013 to 73 days in 2014, remained almost steady in 2016, then increased to a high of 81 days in 2017, before settling back to 78 days in 2018. This suggests that the combined effect of inventory processing and receivable collection periods maintained an overall consistent operational timeline, despite some variations in individual components.

Average Payables Payment Period

HP Inc., average payables payment period calculation, comparison to benchmarks

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data
Payables turnover 3.23 3.20 3.53 4.93 5.33 6.16
Short-term Activity Ratio (no. days)
Average payables payment period1 113 114 103 74 68 59
Benchmarks (no. days)
Average Payables Payment Period, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 3.23 = 113

2 Click competitor name to see calculations.


Payables Turnover
The payables turnover ratio demonstrates a consistent downward trend over the six-year period. Starting at 6.16 in 2013, the ratio steadily declined each year, reaching a low point of 3.20 in 2017, with a slight improvement to 3.23 in 2018. This decreasing trend suggests that the company is paying its suppliers less frequently or taking longer to settle its payables.
Average Payables Payment Period
The average payables payment period exhibits an inverse pattern relative to the payables turnover. It has increased significantly from 59 days in 2013 to 114 days in 2017, followed by a marginal reduction to 113 days in 2018. This indicates a lengthening duration before payments are made to suppliers, reflecting a strategic extension of payment terms or slower disbursement processes.
Insight
The combination of decreasing payables turnover and increasing average payment period suggests that the company has progressively extended its accounts payable cycle. This could be a deliberate effort to conserve cash or optimize working capital management. However, the trend plateaus in the last year, indicating that the extension of payment terms may have reached a limit or that the company is stabilizing its payment practices.

Cash Conversion Cycle

HP Inc., cash conversion cycle calculation, comparison to benchmarks

No. days

Microsoft Excel
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Selected Financial Data
Average inventory processing period 46 50 42 30 28 26
Average receivable collection period 32 31 31 47 45 52
Average payables payment period 113 114 103 74 68 59
Short-term Activity Ratio
Cash conversion cycle1 -35 -33 -30 3 5 19
Benchmarks
Cash Conversion Cycle, Competitors2
Apple Inc.
Arista Networks Inc.
Cisco Systems Inc.
Dell Technologies Inc.
Super Micro Computer Inc.

Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).

1 2018 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 46 + 32113 = -35

2 Click competitor name to see calculations.


Average Inventory Processing Period
The average inventory processing period shows a general upward trend from 26 days in 2013 to a peak of 50 days in 2017, followed by a slight improvement to 46 days in 2018. This indicates that the company has been holding inventory for longer durations over the years, potentially reflecting changes in inventory management or demand patterns.
Average Receivable Collection Period
The receivable collection period decreased significantly from 52 days in 2013 to around 31 days by 2016 and remained relatively stable at 31-32 days through 2018. This suggests an improvement in the efficiency of collecting receivables, resulting in a faster conversion of sales into cash during the latter years.
Average Payables Payment Period
The payables payment period has increased steadily, rising from 59 days in 2013 to 113 days in 2018. This lengthening indicates that the company has been extending the time taken to pay its suppliers, which may be a strategic move to manage cash outflows or negotiate longer credit terms.
Cash Conversion Cycle
The cash conversion cycle has improved markedly, moving from a positive 19 days in 2013 to increasingly negative figures, reaching -35 days in 2018. A negative cash conversion cycle implies that the company receives cash from sales before it needs to pay suppliers, representing strong operational efficiency and favorable working capital management over this period.