Hess Corp. (NYSE:HES)

The analysis of the financial ratios over the five-year period reveals notable fluctuations and trends in operational efficiency and liquidity management.

Inventory Turnover

The inventory turnover ratio decreased slightly from 25.81 in 2018 to 24.89 in 2019, then sharply declined to a negative value of -12.35 in 2020, indicating a disruption or abnormality in inventory management during that year. Subsequently, it rebounded significantly to 33.51 in 2021 and further increased to 52.18 in 2022, suggesting enhanced efficiency in inventory utilization.

Receivables Turnover

This ratio showed a downward trend from 6.32 in 2018 to 5.55 in 2019 and remained nearly stable at 5.43 in 2020. Improvement was observed in 2021 with a rise to 6.17 and a substantial increase to 9.75 in 2022, implying more aggressive or effective collection practices.

Payables Turnover

Payables turnover increased consistently from 12.77 in 2018 to 15.8 in 2019, but then exhibited a large negative value (-23.34) in 2020, mirroring the anomaly seen in inventory turnover. After recovering to 33.97 in 2021 and further climbing to 39.73 in 2022, the data suggest improved management or changes in payment terms post-2020.

Working Capital Turnover

The working capital turnover ratio demonstrated considerable variability, spiking from 2.8 in 2018 to 10.05 in 2019, then falling to 3.2 in 2020. It recovered to 5.83 in 2021 and increased further to 7.38 in 2022, indicating enhanced efficiency in using net working capital over time despite the disruption in 2020.

Average Inventory Processing Period (days)

This metric increased slightly from 14 days in 2018 to 15 days in 2019, was unreported in 2020, then declined to 11 days in 2021 and further to 7 days in 2022, reflecting a trend toward faster inventory turnover and possibly improved inventory management.

Average Receivable Collection Period (days)

The collection period rose from 58 days in 2018 to 66 and 67 days in 2019 and 2020 respectively, indicating slower collections. It decreased to 59 days in 2021 and significantly to 37 days in 2022, demonstrating improved effectiveness in receivables collection in recent years.

Operating Cycle (days)

The operating cycle extended from 72 days in 2018 to 81 days in 2019, was not reported in 2020, then shortened to 70 days in 2021 and further to 44 days in 2022. This reduction suggests gains in overall operational efficiency.

Average Payables Payment Period (days)

This period shortened consistently from 29 days in 2018 to 23 days in 2019, stayed unreported in 2020, then fell to 11 days in 2021 and 9 days in 2022, indicating quicker payments to suppliers over time.

Cash Conversion Cycle (days)

The cash conversion cycle increased from 43 days in 2018 to 58 days in 2019, was not available for 2020, then rose slightly to 59 days in 2021 before decreasing significantly to 35 days in 2022. The recent decline suggests improved cash flow efficiency and working capital management.

Sales and other operating revenues

Sales and other operating revenues experienced notable fluctuations over the periods analyzed. There was a slight increase from 6,323 million USD in 2018 to 6,495 million USD in 2019. However, 2020 showed a significant anomaly with a negative value of -4,667 million USD, indicating extraordinary events impacting revenue recognition. Following this, revenues rebounded sharply to 7,473 million USD in 2021 and further increased to 11,324 million USD in 2022, signaling a strong recovery and growth in operating income toward the latter period.

Inventories

Inventory levels demonstrated moderate variability across the time span. Starting at 245 million USD in 2018, inventories slightly increased to 261 million USD in 2019 and peaked at 378 million USD in 2020. This peak was followed by a decline to 223 million USD in 2021 and a further small reduction to 217 million USD in 2022. The overall trend indicates a buildup of inventory in 2020, possibly related to operational disruptions, followed by a return to lower inventory holdings in subsequent years.

Inventory turnover

Inventory turnover ratios reflect efficiency in managing inventory relative to sales. The ratio slightly decreased from 25.81 in 2018 to 24.89 in 2019. In 2020, there was a negative turnover ratio of -12.35, corresponding with the negative revenue figure, suggesting extraordinary accounting conditions or operational challenges. The ratio then improved significantly to 33.51 in 2021 and accelerated further to 52.18 in 2022, indicating enhanced efficiency in inventory management and faster turnover relative to the increased sales volume during these years.

The financial data reveals several notable trends over the five-year period ending December 31, 2022.

Sales and other operating revenues

Sales exhibited fluctuations with an initial moderate increase from 2018 to 2019, followed by a significant decline in 2020. This decline was succeeded by a strong recovery in 2021 and a pronounced surge in 2022, reaching the highest value observed across the period. This pattern suggests a period of volatility possibly influenced by external factors, but with strong growth momentum in the most recent years.

Accounts receivable

The accounts receivable balance demonstrated some variability but remained within a relatively narrow range. Starting at 1001 million US dollars in 2018, it rose to a peak in 2019, then dropped sharply in 2020. It rebounded significantly in 2021 before declining slightly in 2022. The fluctuations reflect changes in credit sales management and collection efficiency, correlating with the sales trends.

Receivables turnover ratio

The receivables turnover ratio exhibited a downward trend from 6.32 in 2018 to 5.43 in 2020, indicating a slowdown in the collection of receivables during that timeframe. However, this ratio improved in 2021 and increased sharply in 2022 to 9.75, suggesting a significant enhancement in the company's ability to collect outstanding receivables more quickly by the latest year.

Overall, the data indicates that while sales and operating revenues experienced some volatility, the company's receivables management improved markedly in the most recent year, enhancing cash flow potential. The increase in receivables turnover ratio, coupled with the surge in revenues, points to strengthened operational efficiency in credit management by 2022.

Sales and other operating revenues

The sales and operating revenues displayed a generally positive trend over the observed period, with an increase from 6,323 million US dollars in 2018 to 6,495 million in 2019. However, there was a significant decline in 2020, evidenced by a negative value of -4,667 million US dollars, indicating a possible accounting adjustment or exceptional loss. Following this anomaly, revenues recovered sharply to 7,473 million in 2021 and further increased to 11,324 million in 2022, showing robust growth in the latter years.

Accounts payable

Accounts payable values decreased steadily from 495 million US dollars in 2018 to 200 million in 2020, reflecting a reduction in outstanding obligations to suppliers or creditors. In 2021 and 2022, the figures rose modestly to 220 million and 285 million, respectively, indicating a slight increase in payables after the initial reduction.

Payables turnover

The payables turnover ratio exhibited notable volatility throughout the period. It increased from 12.77 in 2018 to 15.8 in 2019, implying improved efficiency in settling payables. In 2020, the ratio turned negative at -23.34, corresponding with the negative revenue figure for the same year, and possibly reflecting reversed or unusual payables activity. Subsequently, the ratio surged sharply to 33.97 in 2021 and further to 39.73 in 2022, suggesting a significant acceleration in payables turnover and more rapid payment cycles.

Working Capital

Working capital exhibited considerable volatility over the observed five-year period. It sharply declined from 2,256 million USD at the end of 2018 to 646 million USD by the end of 2019, indicating a significant reduction in short-term liquidity or operational capital. Subsequently, there was a recovery to 1,458 million USD in 2020, followed by a slight decrease to 1,282 million USD in 2021, and a modest increase again to 1,535 million USD in 2022. The fluctuations suggest varying levels of investment or changes in current assets and liabilities impacting liquidity management.

Sales and Other Operating Revenues

Sales and other operating revenues demonstrated a downward trend from 6,323 million USD in 2018 to 4,667 million USD in 2020, indicating a period of contraction in revenue generation possibly due to external market conditions or internal operational factors. However, a robust recovery ensued, with revenues climbing to 7,473 million USD in 2021 and accelerating significantly to 11,324 million USD in 2022. This pattern reflects a strong rebound and substantial growth in top-line performance in the latter years.

Working Capital Turnover Ratio

The working capital turnover ratio, which indicates the efficiency in utilizing working capital to generate sales, showed pronounced fluctuations. It increased dramatically from 2.8 in 2018 to 10.05 in 2019, suggesting a markedly higher efficiency or possibly the effect of significantly reduced working capital relative to sales. The ratio then declined to 3.2 in 2020, coinciding with lower revenue levels and recovering working capital. In 2021 and 2022, this ratio rose again to 5.83 and 7.38 respectively, reflecting improved operational efficiency and better utilization of working capital alongside rising sales.

Overall Analysis

The financial data reveals a period of volatility and adjustment, with working capital and sales showing inverse patterns at times. The sharp decrease in working capital and sales in 2019-2020 corresponded to a peak in turnover efficiency, indicating a stretched working capital base relative to revenues. Recovery in working capital and a strong resurgence in revenues in 2021 and 2022 were accompanied by improved but stabilized working capital turnover, signifying enhanced financial and operational performance. The trends suggest active management of working capital and successful revenue growth efforts following the downturn period.

Inventory Turnover

The inventory turnover ratio experienced fluctuations during the period analyzed. From 2018 to 2019, there was a slight decline from 25.81 to 24.89, indicating a marginal slowdown in the rate at which inventory was sold and replaced. However, in 2020, the inventory turnover ratio turned negative to -12.35, which suggests an unusual or possibly erroneous value that may reflect inventory write-downs, significant disruptions, or accounting adjustments during that year. Following this, the ratio rebounded sharply in 2021 to 33.51 and increased further to 52.18 in 2022. This upward trend after 2020 points to a more efficient management of inventory with a quicker cycling of stock.

Average Inventory Processing Period

The average inventory processing period, expressed as the number of days inventory is held before being sold, showed a general decrease over the observed timeframe. Starting at 14 days in 2018 and slightly increasing to 15 days in 2019, the data for 2020 is missing, limiting full analysis for that year. However, from 2021 onwards, a notable decrease is observed with the period shortening to 11 days and then to 7 days in 2022. This trend aligns with the increasing inventory turnover ratio and suggests improvements in inventory management efficiency, allowing the company to convert inventory into sales more rapidly.

The analysis of the receivables turnover ratio indicates variability in the efficiency of the company's credit and collection policies over the observed period. The ratio declined from 6.32 in 2018 to 5.43 in 2020, suggesting a reduced effectiveness in collecting receivables during these years. However, there was a recovery in 2021 with the turnover ratio increasing to 6.17, followed by a significant improvement to 9.75 in 2022, indicating a marked enhancement in receivables management and faster collection.

Correspondingly, the average receivable collection period, measured in number of days, exhibits an inverse trend to the turnover ratio. The number of days rose from 58 days in 2018 to a peak of 67 days in 2020, reflecting slower collection processes in these years. Subsequently, the period shortened to 59 days in 2021 and experienced a sharp reduction to 37 days in 2022. This decline corroborates the improvement seen in the turnover ratio, pointing to a more efficient receivables collection cycle by the end of the period.

Receivables Turnover Ratio

Initial decline from 6.32 (2018) to 5.43 (2020), improvement to 6.17 (2021), and significant increase to 9.75 (2022).

Average Receivable Collection Period

Increase from 58 days (2018) to 67 days (2020), followed by reduction to 59 days (2021) and sharp decrease to 37 days (2022).

Overall, the data reveals that after a period of declining collection efficiency, the company substantially improved its receivables management during the last two years, culminating in faster turnover and reduced days sales outstanding in 2022.

The financial data reveals several trends related to the company's operational efficiency over the five-year period ending in 2022.

Average Inventory Processing Period

This metric shows a variable pattern with a general decreasing trend in the later years. Starting at 14 days in 2018, it slightly increased to 15 days in 2019, data for 2020 is not available, then it dropped to 11 days in 2021 and further decreased significantly to 7 days in 2022. This indicates improvements in inventory management and a faster turnover rate in recent years.

Average Receivable Collection Period

The period for collecting receivables initially increased from 58 days in 2018 to 66 days in 2019, then slightly rose to 67 days in 2020. However, it improved notably thereafter, declining to 59 days in 2021 and further down to 37 days in 2022. This trend suggests enhanced efficiency in receivables collection and better cash flow management over time.

Operating Cycle

The operating cycle data is incomplete but shows a decrease from 72 days in 2018 to 44 days in 2022. The cycle increased to 81 days in 2019, lacks data for 2020, then reduced to 70 days in 2021 before a significant decline in 2022. This reduction points toward a more streamlined operation with faster conversion of inventory and receivables into cash.

Overall, the trends indicate a focus on improving working capital management, with shorter inventory processing and receivable collection periods contributing to a reduced operating cycle by 2022. These changes are reflective of enhanced operational efficiency and potentially stronger liquidity positions.

Payables Turnover

The payables turnover ratio exhibits considerable fluctuations over the analyzed periods. It increased from 12.77 in 2018 to 15.8 in 2019, implying a slight improvement in the frequency of paying suppliers. However, in 2020, the ratio sharply declined to a negative value of -23.34, indicating potential accounting irregularities or unusual adjustments affecting payables during that year. Following this anomaly, there was a significant recovery in 2021 and 2022 with ratios rising substantially to 33.97 and 39.73, respectively. This trend suggests strengthened efficiency in managing payables or accelerated payments to suppliers after the disruption in 2020.

Average Payables Payment Period

The average payables payment period shows a generally decreasing trend, indicating a faster payment cycle. It shortened from 29 days in 2018 to 23 days in 2019. Data for 2020 is missing, limiting clear assessment for this year. Nevertheless, the trend resumes downward in 2021 and 2022 with payment periods decreasing to 11 and then 9 days. This reduction suggests an improvement in liquidity management or a strategic shift toward quicker settlement of obligations to suppliers in the last reported years.

Average Inventory Processing Period

The average inventory processing period shows a fluctuating trend over the analyzed years. It increased slightly from 14 days in 2018 to 15 days in 2019, then data is missing for 2020. Subsequently, it decreased significantly to 11 days in 2021 and further declined to 7 days in 2022. This overall reduction in inventory processing time in the latter years suggests improved efficiency in managing inventory turnover.

Average Receivable Collection Period

The average receivable collection period initially rose from 58 days in 2018 to 66 days in 2019 and slightly to 67 days in 2020, indicating a lengthening in the time taken to collect receivables during these years. From 2020 onward, there was a notable decrease to 59 days in 2021 and a more pronounced drop to 37 days in 2022, reflecting enhanced effectiveness in receivables management and quicker cash inflows in the latest year.

Average Payables Payment Period

This period declined from 29 days in 2018 to 23 days in 2019. There is no data available for 2020. In the following years, the payables payment period reduced further to 11 days in 2021 and 9 days in 2022. This points to a trend of faster payment to suppliers or creditors, possibly indicating a more prompt settlement of obligations or changed credit terms.

Cash Conversion Cycle

The cash conversion cycle experienced an upward movement from 43 days in 2018 to 58 days in 2019, with no data provided for 2020. It remained high at 59 days in 2021 before significantly decreasing to 35 days in 2022. The decrease in 2022 suggests a notable improvement in overall working capital management, with faster cash conversion and potentially enhanced liquidity.