Hewlett Packard Enterprise Co. (NYSE:HPE)

Inventory Turnover

The inventory turnover ratio exhibits a declining trend over the observed period. Starting at 8.81 in early 2018, it decreased steadily to 2.51 by April 2024. This indicates slower inventory movement and potentially increased holding periods, reflecting a reduction in operational efficiency regarding inventory management.

Receivables Turnover

Receivables turnover remains relatively stable with fluctuations between 6.95 and 10.49 throughout the timeline. It peaked around mid-2020 at 10.49, followed by some decline and moderate recovery, yet showing no clear long-term upward or downward trend. This suggests consistent efficiency in collecting receivables over the quarters, albeit with some variability.

Payables Turnover

The payables turnover ratio shows a general decline from around 3.54 in early 2018 to 1.82 by April 2024, with some fluctuation. This decreasing trend implies slower payment to suppliers, potentially extending the credit terms or delaying payments, which could be a working capital management strategy or reflect liquidity considerations.

Working Capital Turnover

Data for working capital turnover is only available for one period, starting extremely high at 416.92, with no subsequent data to evaluate trends.

Average Inventory Processing Period

The average inventory processing period demonstrates a marked increase, rising from 41 days in 2018 to as high as 145 days by April 2024. This substantial increase correlates with the declining inventory turnover and indicates inventory is held longer, suggesting slower movement or buildup of stock, possibly affecting liquidity.

Average Receivable Collection Period

The average receivable collection period largely fluctuates between 35 and 53 days. Notably, there was a gradual increase post-2021, reaching around 50 days by early 2024. This suggests a slightly slower collection pace but remains within a moderate range.

Operating Cycle

The operating cycle lengthened significantly from around 80 days in early 2018 to reaching close to 195 days in 2024. This reflects combined effects of increasing inventory holding and receivables collection periods, indicating an elongation of the time taken to convert inputs into cash.

Average Payables Payment Period

The average payables payment period also shows an increasing trend, starting near 103 days and rising to over 200 days by April 2024. This extension suggests that the company is taking longer to settle its payables, which may be an effort to conserve cash or manage liquidity during the period.

Cash Conversion Cycle

The cash conversion cycle shows considerable volatility and a general upward movement from negative values (around -23 days) in 2018 to positive figures exceeding 20 days at times in recent years. Positive values indicate that the company is taking longer to turn investment in inventory and receivables into cash after paying its liabilities. Episodes of negative cash conversion cycle imply efficient working capital management during certain quarters, but overall, the longer duration in recent periods suggests reduced operational liquidity efficiency.

Cost of Revenue

The cost of revenue demonstrates a fluctuating trend over the analyzed periods. Beginning at approximately 5,491 million USD in early 2018, it generally decreases through 2019 and into early 2020, reaching a low point near 4,095 million USD in April 2020. This decline indicates either improved cost efficiency or reduced sales volume. Subsequently, costs rise again entering late 2020 and through 2021, reaching around 4,935 million USD by October 2021, before again showing variability with a slight declining trend toward early 2024, ending around 4,828 million USD. Overall, the cost of revenue reflects cyclical movements with a downward bias in recent quarters.

Inventory

Inventory levels have shown a consistent upward trajectory throughout the periods under review. Starting at approximately 2,431 million USD in early 2018, the inventory steadily grows, with noticeable acceleration from mid-2020 onward. By April 2024, inventory peaks at around 7,326 million USD, indicating a substantial accumulation of stock. This sharp rise may suggest overstocking, changes in supply chain dynamics, or preparation for anticipated demand. The inventory increase is particularly significant relative to the changes in cost of revenue, which have not displayed a comparable rate of increase.

Inventory Turnover Ratio

The inventory turnover ratio experiences a marked decline over the course of these periods. Early data around mid-2018 show strong turnover ratios above 8, indicating efficient inventory management and quick sales relative to stock levels. From this point, the turnover ratio diminishes steadily, falling below 5 by late 2020 and continuing to decrease to approximately 2.5 by April 2024. This decline corresponds with the increasing inventory levels and suggests a slower movement of stock, potentially signaling excess inventory, weaker demand, or operational inefficiencies.

Summary of Trends and Insights

The combined trends suggest that while the company’s cost of revenue has fluctuated with some periods of decline, inventory levels have consistently risen, leading to a substantial accumulation of stock. This growing inventory coupled with decreasing inventory turnover ratios points to less efficient inventory management and slower conversion of stock to sales. The divergence between stabilizing or modestly declining costs and rapidly increasing inventory may reflect challenges such as slowed demand, supply chain disruptions, or strategic stockpiling. Such dynamics could impact working capital and require management focus to optimize inventory levels and align them more closely with sales trends.

The analyzed financial data reveals several notable trends over the observed periods in terms of net revenue, accounts receivable, and receivables turnover ratio.

Net Revenue

Net revenue exhibited fluctuations without a consistent directional trend over the quarters. Initial values near the start of 2018 generally hovered between approximately 7,400 million and 7,900 million US dollars. There was a discernible dip during the early 2020 periods, with a sharp decline reaching a low around 6,000 million US dollars during April 2020, likely influenced by external disruptions. Post this low, net revenue mostly recovered, returning to levels around 7,000 million US dollars or higher, peaking notably at approximately 7,871 million US dollars in October 2022. However, recent quarters toward early 2024 saw a decline again to values near 6,755 to 7,204 million US dollars, indicating some volatility and possibly market or operational challenges.

Accounts Receivable, Net of Allowances

The accounts receivable figures display a pattern of gradual increases and decreases, with some marked surges. Values began near the 3,000 million US dollars mark in early 2018 and maintained a relatively stable range initially. Midway through the timeline, particularly from 2020 onwards, variability increased with significant peaks observed around October 2021 and continuing into 2023, where receivables reached levels above 4,000 million US dollars. These peaks may suggest extended credit terms or slower collections during these periods. The increments in receivables near late 2021 and into 2022 correspond to periods where net revenue was elevated, indicating alignment between higher sales and associated receivables.

Receivables Turnover Ratio

The receivables turnover ratio, an indicator of how efficiently receivables are collected, displayed considerable variation. Early periods around mid-2018 to mid-2019 showed ratios mostly above 9, reflecting relatively effective collections. However, from 2020 onwards, the ratio trended downwards with multiple fluctuations, falling below 8 in many quarters and into the high 6s during parts of 2022 and early 2023. This downward trend in turnover ratio indicates a deceleration in the company's ability to collect outstanding receivables promptly. Some recovery is observed in late 2023, but the ratio remains below the levels seen prior to 2020.

In summary, the data indicates that while net revenue has experienced cyclical fluctuations, significant disruptions around 2020 were followed by partial recovery. Accounts receivable grew substantially in some later periods, which together with the declining receivables turnover ratio suggests increasing challenges in collections efficiency. This combination may warrant attention to credit policies and cash flow management to maintain liquidity and operational effectiveness in forthcoming periods.

The analysis of the financial data reveals the following trends and observations over the examined periods.

Cost of Revenue

The cost of revenue displays a fluctuating pattern with a general decline in recent periods. Initially, values around 5,000 to 5,500 million US dollars were observed, with some reductions in the years 2020 and early 2021. A notable decrease occurred during the quarters around April 2020 and April 2021, followed by a slight recovery. However, from January 2022 onwards, the cost of revenue demonstrates increased variability with peaks and troughs, reflecting possible changes in sales volume, input costs, or operational efficiency. The most recent figures show a downward movement, with a dip to approximately 4,300 million US dollars in January 2024 before a moderate rebound in April 2024.

Accounts Payable

The accounts payable figures showcase a different trend characterized by a gradual increase over time. Beginning near 5,900 million US dollars in early 2018, the values decreased slightly during mid-2018 but generally rose afterward. There is a distinct growing trend, particularly from 2021 onwards, with several quarters exceeding 6,000 million US dollars and peaking above 10,000 million US dollars by April 2024. This upward movement suggests an extension in payment terms, higher procurement levels, or potential changes in vendor management practices.

Payables Turnover Ratio

The payables turnover ratio exhibits considerable volatility with a downward trajectory over the time span. Initially, turnover ratios were around 3.5 to 3.9 times, indicating a relatively high frequency of paying suppliers within the year. From 2020 onward, there is a marked decline, reaching values as low as 1.82 by April 2024. This reduction implies that the company is taking longer to pay its suppliers, which may be a strategic decision to manage cash flows or indicative of other operational constraints. The fluctuations within this ratio highlight changing patterns in accounts payable management.

Overall, the financial indicators reflect a complex interplay between operational costs, creditor management, and payment practices. The decrease in cost of revenue alongside an increasing accounts payable balance and decreasing payables turnover ratio may signal a strategic approach to cash flow optimization, although this might also raise concerns about supplier relations or liquidity pressures. Close monitoring of these trends is advisable to ensure sustainable financial health.

The analysis of the quarterly financial data reveals several noteworthy trends and shifts in key financial metrics over the period from January 2018 to April 2024.

Working Capital

The working capital position shows a marked decline starting from a positive value of 1,156 million USD in January 2018, eventually turning negative by January 2019, where it reached -1,027 million USD. This negative trend deepened through subsequent quarters, hitting a low point around -4,016 million USD in October 2019. Although some intermittent improvements are observed in the early 2020s, the overall working capital remains negative in all subsequent periods, fluctuating but showing no sustained recovery back to positive territory. The data indicates significant liquidity pressure or changes in current asset and liability management during this timeframe.

Net Revenue

Net revenue demonstrates a relatively stable pattern with some fluctuations but no consistent upward or downward trend. The values oscillate between approximately 6,000 million USD to nearly 8,000 million USD throughout the quarters. Notably, net revenue declined from early 2020, corresponding with the onset of the global COVID-19 pandemic, with a low of 6,009 million USD in April 2020, followed by a recovery phase that peaks at 7,871 million USD in January 2023. The fluctuations suggest responsiveness to external market conditions and potential cyclical variations in the business environment.

Working Capital Turnover

Working capital turnover ratio data is largely absent except for a single recorded ratio of 416.92, which lacks context and subsequent comparative figures. This limits the ability to analyze operational efficiency trends via this metric over time.

In summary, liquidity as proxied by working capital has deteriorated substantially since early 2018, maintaining a persistent negative stance in recent years. Conversely, net revenue has experienced some volatility likely impacted by external factors but has shown resilience with periods of recovery. The absence of comprehensive working capital turnover data restricts a deeper operational efficiency analysis.

The analysis of the quarterly inventory turnover ratio and average inventory processing period indicates significant fluctuations and a general declining trend in efficiency over the observed periods from early 2018 to mid-2024.

Inventory Turnover Ratio

The inventory turnover ratio starts at a relatively high level in early 2018, with figures above 8.8, indicating rapid inventory movement. It peaks around mid-2018 with a ratio reaching approximately 9.6, signaling strong inventory management and sales performance.

From late 2018 into 2019, there is a noticeable decline in this ratio, dropping from highs near 9.2 to approximately 5.3 by mid-2020, which suggests a slowdown in inventory turnover and potentially reduced sales velocity or excess inventory accumulation during this period.

Post mid-2020, the ratio slightly recovers, fluctuating between 4 and 6 until early 2022 but then continues on a downward path from 4.2 in early 2023 towards 2.5 by the second quarter of 2024. This continued decrease reflects a sustained reduction in inventory turnover efficiency, potentially due to operational challenges, demand shifts, or supply chain issues.

Average Inventory Processing Period

Conversely, the average inventory processing period, which measures the average number of days inventory remains before sale, demonstrates an inverse trend relative to turnover ratio.

Initially, this period was around 38-41 days in 2018 but increased steadily, reaching roughly 69 days by mid-2020. This significant lengthening indicates slower inventory movement and possible buildup of stock.

From 2020 onward, the period extends further, with values climbing to nearly 78 days by late 2021 and then sharply rising to over 100 days between 2022 and early 2024. Notably, the figure peaks at 145 days by April 2024.

This progressive increase exemplifies reduced inventory turnover speeds, longer holding times, and likely elevated carrying costs, which could impact the company's working capital requirements and operational efficiency adversely.

In summary, the data reveals a clear deteriorating trend in inventory management effectiveness over the analyzed timeframe. Early periods exhibited high turnover rates and relatively quick inventory processing, while recent years show slowing inventory movement, prolonged processing times, and diminished inventory turnover ratios. These patterns suggest challenges in aligning inventory levels with market demand or possible supply chain inefficiencies, necessitating focused management attention to improve inventory control and enhance liquidity.

Receivables Turnover

The receivables turnover ratio exhibits a fluctuating pattern over the observed periods. Initially, it increased from 9.46 to a peak near 10.49 between early 2019 and mid-2020, indicating an improvement in the efficiency of collecting receivables during that time. However, following this peak, there is a notable decline starting in late 2020, with values dropping below 7.00 by early 2023. Subsequently, a modest recovery occurs through 2023, with ratios rising back to the range of approximately 7.4 to 8.6 before slightly decreasing again in early 2024. Overall, the trend reflects periods of both enhanced and diminished efficiency, with recent ratios lower compared to the highs observed around 2020.

Average Receivable Collection Period

The average collection period displays an inverse pattern relative to the receivables turnover. The number of days required to collect receivables initially decreased, reaching as low as 35 days in mid-2020, signaling faster collections. This was followed by a significant increase in the collection period, peaking at around 53 days in early 2023, implying slower cash inflows from receivables. A slight improvement is observed afterward, with days decreasing to the low 40s, before increasing again to about 49–50 days in early 2024. These fluctuations suggest variability in credit management effectiveness and possible changes in customer payment behavior or credit terms.

Overall Insights

The financial data indicates that after a period of relatively strong receivables management performance, there has been a gradual decline in efficiency beginning post-2020. The increase in average collection days concomitant with a decrease in turnover ratio may reflect challenges in receivables administration, tighter market conditions, or shifts in client payment patterns. The recent partial recovery in turnover, coupled with a still elevated collection period, points to ongoing volatility in receivables management that may warrant closer operational scrutiny.

The data reveals evolving patterns in inventory management, receivables collection, and overall operating efficiency over the periods analyzed. Key observations span from early 2018 through the first quarter of 2024.

Average Inventory Processing Period

This metric demonstrates a generally increasing trend. Starting at 41 days in early 2018, the period initially showed minor fluctuations but escalated markedly beginning around 2020. After reaching a peak of 69 days in mid-2020, it continued to rise intermittently, culminating at 145 days by the end of the first quarter of 2024. This suggests a growing length of time for inventory turnover, possibly indicating challenges in inventory management or changes in sales velocity.

Average Receivable Collection Period

The receivable collection period remained relatively stable with mild fluctuations. Initially around 39 days in early 2018, it stayed mostly within the 35 to 50 days range throughout the timeline. Notably, there was a small increase to mid-40s and low-50s in some periods around 2021 to 2023, but the value did not show a dramatic upward or downward shift. This indicates consistent customer payment behavior and credit policies over time.

Operating Cycle

The operating cycle, which combines inventory processing and receivables collection periods, showed a clear upward trajectory. From approximately 80 days in early 2018, it gradually increased with some accelerations, peaking at 195 days by the end of the first quarter of 2024. This lengthening operating cycle reflects the extended inventory holding periods while receivables collection remained relatively stable, highlighting a growing cash conversion cycle that could impact working capital efficiency.

In summary, the financial data implies a lengthening of the company's inventory turnover and overall operating cycle, while the receivables collection period has remained comparatively steady. This trend may warrant attention to inventory management practices to enhance liquidity and optimize operational efficiency in forthcoming periods.

The analysis of the payable turnover and the average payables payment period reveals notable fluctuations over the observed periods.

Payables Turnover Ratio

The payables turnover ratio, which measures how many times the company pays its suppliers during a period, exhibits a general downward trend from early 2019 through to April 2024. Initial values around 3.54 to 3.90 in 2019 indicate relatively frequent payments to suppliers. However, starting from late 2019, the ratio declines progressively, reaching as low as 1.82 by April 2024. This decrease suggests that the company is taking longer to settle its payables over time, reflecting either a strategic extension of payment terms or potential liquidity constraints.

Average Payables Payment Period

The average payables payment period, expressed in days, corresponds inversely to the payables turnover ratio. From 2019 onwards, there is an evident increase in the average number of days taken to pay suppliers. Initially ranging around 94 to 103 days, the payment period extends significantly, peaking at 201 days in April 2024. This rising trend indicates that the company is increasingly delaying payments, which may improve short-term cash flow but could also risk supplier relationships.

Overall, the data highlight a shift towards longer payment periods and reduced frequency of payables turnover. Such a trend may reflect changes in working capital management strategies or financial pressures, with implications for supplier negotiations and corporate liquidity management.

The analysis of the financial periods reveals several notable trends across the inventory processing, receivable collection, payables payment periods, and the overall cash conversion cycle.

Average Inventory Processing Period

The inventory processing period starts at 41 days and experiences minor fluctuations initially, followed by a substantial increase beginning in early 2021. It peaks at 145 days in April 2024, indicating a significantly slower turnover of inventory in recent quarters compared to earlier periods. This trend suggests potential challenges in stock management or changes in demand and supply chain conditions.

Average Receivable Collection Period

The receivable collection days remain relatively stable, mostly oscillating within the mid-30s to mid-40s range. There is a slight upward movement towards the later periods, climbing from 39 days to 50 days by April 2024. This implies a modest lengthening in the time customers take to settle their accounts but still within a controlled range.

Average Payables Payment Period

The payables payment period exhibits considerable variability with an overall upward trajectory. Starting at 103 days (where data begins), it extends to a peak of 201 days in April 2024. This significant extension indicates the company is taking longer to pay its suppliers, which could be a deliberate working capital management strategy or reflect liquidity pressures.

Cash Conversion Cycle

The cash conversion cycle (CCC), representing the net time between cash outflow and inflow related to operating activities, shows marked fluctuations. Initially negative, indicating a favorable position where the company receives payments before paying suppliers, the CCC shifts to positive values around late 2021 and early 2022, reaching a peak of 34 days. Afterward, it reverses back towards negative values by mid-2023 and early 2024, suggesting a recovery to shorter cash cycles. This volatility highlights variability in operational efficiency and cash flow timing.

In summary, the data suggests increasing challenges in inventory turnover and payables management over the multi-year horizon, contrasted with relatively stable receivables collection. The cash conversion cycle movements reflect these underlying changes, showing periods of both elongation and improvement, indicative of shifting working capital dynamics and possibly strategic adjustments in financial management practices.