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)
Hershey Co., long-term (investment) activity ratios
Based on: 10-K (reporting date: 2022-12-31), 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).
The investment activity ratios exhibit a general pattern of contraction between 2018 and 2021, followed by a partial recovery in 2022, with the notable exception of equity turnover, which demonstrates a continuous and significant decline over the five-year period.
- Fixed Asset Efficiency
- Net fixed asset turnover remained relatively stable, fluctuating within a narrow range between 3.47 and 3.76. The ratio reached its period high in 2022 at 3.76, suggesting a recovery in the efficiency of generating sales from fixed assets. In contrast, the net fixed asset turnover including right-of-use assets showed a more pronounced decline from 3.66 in 2018 to a low of 3.05 in 2021, before recovering to 3.37 in 2022.
- Total Asset Utilization
- Total asset turnover experienced a steady decrease from 1.01 in 2018 to 0.86 in 2021, indicating a period of diminishing efficiency in utilizing the total asset base to drive revenue. This trend reversed in 2022, with the ratio improving to 0.95, moving closer to the 2018 baseline.
- Equity Utilization
- Equity turnover displays a consistent downward trajectory, falling from 5.57 in 2018 to 3.16 in 2022. This persistent decline indicates that the volume of sales generated per unit of equity has decreased substantially, which may suggest that the growth in equity has significantly outpaced the growth in revenue throughout the analyzed period.
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Net Fixed Asset Turnover
Hershey Co., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 10,419,294) | 8,971,337) | 8,149,719) | 7,986,252) | 7,791,069) | |
| Property, plant and equipment, net | 2,769,702) | 2,586,187) | 2,285,255) | 2,153,139) | 2,130,294) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 3.76 | 3.47 | 3.57 | 3.71 | 3.66 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Coca-Cola Co. | 4.37 | 3.90 | — | — | — | |
| Mondelēz International Inc. | 3.49 | 3.32 | — | — | — | |
| PepsiCo Inc. | 3.56 | 3.55 | — | — | — | |
| Philip Morris International Inc. | 4.73 | 5.09 | — | — | — | |
| Net Fixed Asset Turnover, Sector | ||||||
| Food, Beverage & Tobacco | 3.86 | 3.78 | — | — | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Consumer Staples | 5.21 | 5.06 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Net fixed asset turnover = Net sales ÷ Property, plant and equipment, net
= 10,419,294 ÷ 2,769,702 = 3.76
2 Click competitor name to see calculations.
The analysis of long-term activity between 2018 and 2022 reveals a period of consistent expansion in both revenue and capital investment. Net sales experienced a steady upward trajectory, supported by a corresponding increase in net property, plant, and equipment.
- Revenue and Capital Investment Trends
- Net sales grew from 7,791,069 thousand US$ in 2018 to 10,419,294 thousand US$ in 2022. During the same period, net property, plant, and equipment increased from 2,130,294 thousand US$ to 2,769,702 thousand US$. This indicates a sustained commitment to expanding the fixed asset base to facilitate higher production and sales volumes.
- Net Fixed Asset Turnover Performance
- The net fixed asset turnover ratio exhibited a non-linear trend, characterized by a slight initial increase to 3.71 in 2019, followed by a two-year decline that reached a period low of 3.47 in 2021. This downward movement suggests that during the 2019-2021 window, the growth in fixed assets outpaced the growth in sales, potentially reflecting the lag time between capital expenditure and the realization of full operational capacity.
- Operational Efficiency Recovery
- A significant recovery in asset utilization is observed in 2022, with the turnover ratio rising to 3.76, the highest level in the five-year period. This rebound indicates that the company successfully leveraged its expanded asset base to drive a substantial increase in net sales, resulting in improved efficiency in generating revenue from its long-term investments.
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Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Hershey Co., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 10,419,294) | 8,971,337) | 8,149,719) | 7,986,252) | 7,791,069) | |
| Property, plant and equipment, net | 2,769,702) | 2,586,187) | 2,285,255) | 2,153,139) | 2,130,294) | |
| Operating lease ROU assets | 326,472) | 351,712) | 224,268) | 220,678) | —) | |
| Property, plant and equipment, net (including operating lease, right-of-use asset) | 3,096,174) | 2,937,899) | 2,509,523) | 2,373,817) | 2,130,294) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 3.37 | 3.05 | 3.25 | 3.36 | 3.66 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Coca-Cola Co. | 3.82 | 3.41 | — | — | — | |
| Mondelēz International Inc. | 3.25 | 3.10 | — | — | — | |
| PepsiCo Inc. | 3.24 | 3.25 | — | — | — | |
| Philip Morris International Inc. | 4.35 | 4.69 | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Food, Beverage & Tobacco | 3.51 | 3.45 | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Consumer Staples | 4.69 | 4.55 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 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)
= 10,419,294 ÷ 3,096,174 = 3.37
2 Click competitor name to see calculations.
Net sales exhibited a consistent upward trajectory from 2018 to 2022, increasing from approximately $7.79 billion to $10.42 billion. Over the same period, the investment in net property, plant, and equipment, including right-of-use assets, grew steadily from $2.13 billion to $3.10 billion. While both metrics increased, the rate of growth differed across the five-year window, impacting the efficiency of asset utilization.
- Net Fixed Asset Turnover Trend
- A downward trend in the net fixed asset turnover ratio was observed from 2018 through 2021, with the ratio declining from 3.66 to 3.05. This contraction indicates that during this period, the expansion of the fixed asset base outpaced the growth in net sales, leading to a temporary reduction in the revenue generated per dollar of invested capital in fixed assets.
- Operational Recovery in 2022
- A recovery in asset efficiency occurred in 2022, as the ratio rose to 3.37. This improvement is attributable to a significant acceleration in net sales growth, which surpassed the increase in net property, plant, and equipment for that fiscal year, thereby enhancing the productivity of the long-term investment base.
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Total Asset Turnover
Hershey Co., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 10,419,294) | 8,971,337) | 8,149,719) | 7,986,252) | 7,791,069) | |
| Total assets | 10,948,820) | 10,412,231) | 9,131,845) | 8,140,395) | 7,703,020) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.95 | 0.86 | 0.89 | 0.98 | 1.01 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Coca-Cola Co. | 0.46 | 0.41 | — | — | — | |
| Mondelēz International Inc. | 0.44 | 0.43 | — | — | — | |
| PepsiCo Inc. | 0.94 | 0.86 | — | — | — | |
| Philip Morris International Inc. | 0.51 | 0.76 | — | — | — | |
| Total Asset Turnover, Sector | ||||||
| Food, Beverage & Tobacco | 0.61 | 0.60 | — | — | — | |
| Total Asset Turnover, Industry | ||||||
| Consumer Staples | 1.47 | 1.41 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Total asset turnover = Net sales ÷ Total assets
= 10,419,294 ÷ 10,948,820 = 0.95
2 Click competitor name to see calculations.
Net sales exhibited consistent growth over the five-year period, increasing from US$ 7.79 billion in 2018 to US$ 10.42 billion in 2022. Simultaneously, total assets grew from US$ 7.70 billion to US$ 10.95 billion. While both metrics trended upward, the rate of asset accumulation initially exceeded the rate of revenue growth, impacting overall operational efficiency.
- Total Asset Turnover Trend
- The total asset turnover ratio experienced a steady decline from 1.01 in 2018 to a low of 0.86 in 2021. This contraction indicates a period where the expansion of the asset base occurred more rapidly than the generation of corresponding sales, resulting in a decrease in asset utilization efficiency.
- Efficiency Recovery in 2022
- A notable reversal is observed in 2022, with the ratio increasing to 0.95. This improvement is driven by a significant acceleration in net sales, which grew by approximately 15.8% year-over-year, outpacing the more modest 5.2% increase in total assets for that period.
The analysis indicates that after a multi-year trend of diminishing efficiency in asset deployment, the company successfully leveraged its expanded asset base in 2022 to drive higher revenue output. The recovery toward a ratio of 1.00 suggests an improved alignment between long-term investment in assets and sales generation capacity.
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Equity Turnover
Hershey Co., equity turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 10,419,294) | 8,971,337) | 8,149,719) | 7,986,252) | 7,791,069) | |
| Total The Hershey Company stockholders’ equity | 3,299,544) | 2,757,229) | 2,234,352) | 1,739,222) | 1,398,721) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 3.16 | 3.25 | 3.65 | 4.59 | 5.57 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Coca-Cola Co. | 1.78 | 1.68 | — | — | — | |
| Mondelēz International Inc. | 1.17 | 1.02 | — | — | — | |
| PepsiCo Inc. | 5.04 | 4.95 | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
| Equity Turnover, Sector | ||||||
| Food, Beverage & Tobacco | 3.26 | 3.12 | — | — | — | |
| Equity Turnover, Industry | ||||||
| Consumer Staples | 5.26 | 5.06 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Equity turnover = Net sales ÷ Total The Hershey Company stockholders’ equity
= 10,419,294 ÷ 3,299,544 = 3.16
2 Click competitor name to see calculations.
An analysis of the long-term investment activity ratios reveals a distinct divergence between revenue growth and the expansion of shareholders' equity, leading to a sustained decline in equity turnover from 2018 to 2022.
- Net Sales Performance
- Net sales exhibited a consistent upward trajectory throughout the period, increasing from US$ 7,791,069 thousand in 2018 to US$ 10,419,294 thousand in 2022. The most significant growth occurred between 2021 and 2022, marking a substantial acceleration in top-line revenue.
- Stockholders' Equity Expansion
- Total stockholders' equity grew rapidly and continuously, rising from US$ 1,398,721 thousand in 2018 to US$ 3,299,544 thousand in 2022. This represents an increase of approximately 136% over the five-year span, indicating a significant accumulation of capital.
- Equity Turnover Analysis
- The equity turnover ratio experienced a steady decline, falling from 5.57 in 2018 to 3.16 in 2022. This downward trend persists despite the increase in absolute sales, confirming that the growth in the equity base has outpaced the growth in net sales.
The data indicates that while the company is successfully expanding its market reach and revenue, the efficiency with which it utilizes its equity to generate those sales has diminished. The substantial increase in equity has resulted in a lower turnover ratio, suggesting a shift toward a more heavily capitalized financial structure.
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