Hewlett Packard Enterprise Co. (NYSE:HPE)

The financial data reveals several notable trends related to working capital management and operational efficiency over the period under review.

Inventory Turnover

This ratio exhibits a clear downward trajectory from 8.81 in 2018 to a low of 3.68 in 2022, followed by a slight recovery to 4.1 in 2023. The declining turnover suggests slower inventory movement, further corroborated by the increasing average inventory processing period, which rose steadily from 41 days in 2018 to 99 days in 2022, before slightly decreasing to 89 days in 2023. This indicates an elongation of the time inventory remains in stock, affecting inventory management efficiency.

Receivables Turnover

Receivables turnover shows variability with a peak at 9.85 in 2019, declining sharply to 6.95 in 2022, and then rebounding to 8.37 in 2023. This trend is mirrored by the average receivable collection period, which lengthened from 37 days in 2019 to 53 days in 2022, before improving to 44 days in 2023. The initial increase in collection period indicates customers took longer to pay, affecting liquidity, but improvements noted in 2023 may reflect more effective receivables management.

Payables Turnover

This ratio steadily decreases from 3.54 in 2018 to 2.18 in 2022, with modest recovery to 2.65 in 2023. The average payables payment period extends correspondingly from 103 days in 2018 to 168 days in 2022, before contracting to 138 days in 2023. This suggests the company has been taking longer to settle its payables, which may be a strategy to conserve cash, although the slight reduction in 2023 signals some normalization of payment practices.

Operating Cycle

The operating cycle progressively lengthens from 80 days in 2018 to a peak of 152 days in 2022, before decreasing to 133 days in 2023. The extension of the operating cycle indicates that the combined duration of inventory holding and receivables collection has increased substantially, implying slower conversion of inventory and receivables into cash, potentially impacting operational liquidity.

Cash Conversion Cycle

The cash conversion cycle remains negative or close to zero for most of the period, moving from -23 days in 2018 and 2019, rising slightly to 2 days in 2021, then improving to -16 days in 2022 and -5 days in 2023. A negative cash conversion cycle generally indicates that the company is able to collect cash from customers before paying its suppliers, which can be favorable for cash flow management. The fluctuations observed suggest varying effectiveness in synchronizing inventory, receivables, and payables over the years.

Working Capital Turnover

Data for working capital turnover is available only for 2018, with a notably high ratio of 416.92, which precludes trend analysis. However, such a high value suggests extremely efficient use of working capital at that time.

Overall, the data indicate a deterioration in operational efficiency and working capital management between 2018 and 2022, characterized by slowing inventory turnover, lengthening collection and payment periods, and an extended operating cycle. Slight improvements in 2023 across multiple metrics suggest efforts to enhance efficiency and better control of cash flows. The persistent negative cash conversion cycle underscores an ability to leverage supplier credit to support liquidity, albeit with some variability. These trends highlight the need for ongoing attention to inventory management, receivables collection, and payables policies to optimize working capital utilization.

Cost of Revenue

The cost of revenue displayed a general downward trend from 2018 to 2021, decreasing from 21,560 million USD in 2018 to 18,408 million USD in 2021. However, there was a slight increase in 2022 to 18,990 million USD, followed by a minor decrease to 18,896 million USD in 2023. Overall, the cost of revenue appears to have stabilized around the 18,900 million USD mark in the most recent years.

Inventory

Inventory levels showed a consistent upward trend from 2018 through 2022, rising significantly from 2,447 million USD in 2018 to a peak of 5,161 million USD in 2022. In 2023, inventory decreased slightly to 4,607 million USD, indicating a possible inventory reduction strategy or improved inventory management after a period of accumulation.

Inventory Turnover

The inventory turnover ratio has declined notably over the analyzed period. Starting at 8.81 in 2018, it decreased steadily to 4.08 in 2021, representing a substantial reduction in how quickly inventory is sold or used. The trend continued with a further decrease to 3.68 in 2022, then a slight improvement to 4.1 in 2023. The lower ratio suggests slower inventory turnover, which may indicate excess inventory or reduced sales velocity during these years.

Summary Insights

The company experienced a reduction in cost of revenue over the initial years, stabilizing in the recent period. Meanwhile, inventory levels increased markedly until 2022, followed by a modest decline in 2023. Concurrently, inventory turnover declined sharply, indicating slower movement of stock. The slight uptick in inventory turnover in 2023 could reflect improved efficiency or changes in sales patterns. Overall, these trends suggest challenges in inventory management and sales pacing that may warrant further investigation.

Net Revenue

The net revenue demonstrates a fluctuating pattern over the six-year period. Starting at $30,852 million in 2018, it declines steadily over the next two years to $26,982 million in 2020. This is followed by a gradual recovery, increasing each year from 2020 through 2023, reaching $29,135 million again, equivalent to the revenue recorded in 2019 but still slightly below the 2018 peak. The trend indicates some volatility, with a dip likely affecting operational performance during the middle years, but an overall stabilization towards the latest period.

Accounts Receivable, Net of Allowances

Accounts receivable increased from $3,263 million in 2018 to a high of $4,101 million in 2022, showing a general upward trajectory with the sharpest rise occurring between 2020 and 2022. However, this figure drops in 2023 to $3,481 million, suggesting some improvement or changes in credit policies or collection efficiency in the most recent year. The increased receivables in preceding years correspond with fluctuations in revenue and potential changes in sales terms or collection periods.

Receivables Turnover Ratio

The receivables turnover ratio shows a clear decline from 9.46 in 2018 to a low of 6.95 in 2022, indicating a slower collection of receivables over this time span. This decreasing trend suggests potential delays in collecting credit sales or extended payment terms to customers. In 2023, the ratio improves to 8.37, signaling a recovery in collection efficiency. The inverse relationship between the rise in accounts receivable and the decline in turnover ratio during the same period reaffirms issues in receivables management, which appear to be addressed partially in the latest year.

Cost of Revenue

The cost of revenue has shown a general declining trend from 2018 to 2021, decreasing from 21,560 million USD in 2018 to 18,408 million USD in 2021. However, this downward trend was interrupted in 2022 when the cost increased slightly to 18,990 million USD, followed by a modest decline again to 18,896 million USD in 2023. Overall, the cost of revenue decreased by approximately 12.3% over the six-year period.

Accounts Payable

Accounts payable figures initially declined from 6,092 million USD in 2018 to 5,383 million USD in 2020. After this period, a significant increase was observed, rising sharply to 7,004 million USD in 2021 and further to 8,717 million USD in 2022. In 2023, the accounts payable amount decreased to 7,136 million USD but remained higher than the values recorded before 2021. This indicates a substantial build-up in payables, especially from 2020 onwards, with a peak in 2022.

Payables Turnover Ratio

The payables turnover ratio demonstrates a decreasing trend from 3.54 in 2018 to a low of 2.18 in 2022, indicating that the company took longer to pay its suppliers over time. However, in 2023, the ratio slightly improved to 2.65. The decline in turnover ratio corresponds with the increase in accounts payable, suggesting extended payment terms or slower payment cycles, particularly between 2020 and 2022.

Working Capital

The working capital experienced a significant decline from 74 million USD in 2018 to a negative value of -4016 million USD in 2019. While it somewhat recovered to -2182 million USD in 2020, it remained negative and continued to deteriorate slightly over the following years, reaching -2934 million USD by 2023. This consistent negative working capital trend suggests potential liquidity challenges and indicates that current liabilities exceed current assets throughout this period.

Net Revenue

Net revenue declined from 30,852 million USD in 2018 to 29,135 million USD in 2019, followed by a further decrease to 26,982 million USD in 2020. However, revenue showed a modest recovery from 2020 onward, increasing to 27,784 million USD in 2021 and continuing to rise to 29,496 million USD and 29,135 million USD in 2022 and 2023, respectively. This indicates some stabilization and slight growth after a downward trend in the earlier years.

Working Capital Turnover

The working capital turnover ratio is reported only for 2018 at 416.92, with no data for subsequent years. Given the rapid deterioration and negative values in working capital from 2019 onwards, calculation of this ratio may not have been meaningful or feasible in later periods.

In summary, the data exhibits a marked deterioration in working capital over the analyzed years, with values turning negative and declining further, suggesting increasing short-term liquidity constraints. Meanwhile, the net revenue displayed an initial downward trend, followed by modest recovery and stabilization. The lack of reported working capital turnover ratios after 2018 likely reflects challenges in calculating this metric under conditions of negative working capital.

Inventory Turnover

The inventory turnover ratio exhibits a declining trend from 8.81 in 2018 to 4.1 in 2023. This represents a significant decrease in the frequency at which inventory is sold and replaced over the years. The most pronounced drop occurred between 2020 and 2021, where the ratio fell from 6.92 to 4.08. While there is a slight improvement from 2022 to 2023 (3.68 to 4.1), the overall trajectory points to a slowing movement of inventory.

Average Inventory Processing Period

The average inventory processing period shows a consistent increase from 41 days in 2018 to a peak of 99 days in 2022, before slightly decreasing to 89 days in 2023. This indicates that the company has been holding inventory for longer periods over time, which aligns inversely with the declining inventory turnover ratio. The sharpest increase occurs between 2020 and 2021, moving from 53 days to 89 days, implying potential challenges in inventory management or changes in demand.

Overall Analysis

The simultaneous decrease in inventory turnover and increase in average inventory processing period indicate a slowdown in the efficiency of inventory utilization. The company appears to be taking longer to convert inventory into sales, which could suggest overstocking, reduced demand, or supply chain inefficiencies. The slight improvement in inventory turnover and reduction in processing period in 2023 may signal initial corrective measures or market stabilization; however, these remain substantially below earlier years, reflecting ongoing issues in inventory management that may warrant attention.

Receivables Turnover

The receivables turnover ratio decreased from 9.46 in 2018 to a low point of 6.95 in 2022, indicating a declining efficiency in collecting receivables over this period. However, in 2023, there was a noticeable improvement to 8.37, suggesting a recovery in collection performance.

Average Receivable Collection Period

The average collection period exhibited an inverse trend to receivables turnover, starting at 39 days in 2018 and increasing steadily to 53 days by 2022, reflecting a lengthening of the time taken to collect receivables. In 2023, this figure improved to 44 days, indicating a quicker collection cycle compared to the prior two years.

Overall Trend and Insights

The analysis reveals a weakening in receivables management from 2018 through 2022, with slower collection times and reduced turnover ratios. The reversal of these trends in 2023 points to enhanced efforts or improvements in credit and collection policies, leading to better working capital management.

Average Inventory Processing Period

The average inventory processing period exhibits a rising trend from 41 days in 2018 to a peak of 99 days in 2022, followed by a decline to 89 days in 2023. This suggests an increasing duration for inventory turnover over the years, reaching a high point in 2022 before slightly improving in the subsequent year.

Average Receivable Collection Period

The average receivable collection period shows moderate fluctuations, starting at 39 days in 2018, decreasing to 37 days in 2019, then increasing to 53 days by 2022. In 2023, this period shortens to 44 days. Overall, the receivable collection period increased over the timeframe but displayed improvement in the last year.

Operating Cycle

The operating cycle follows a consistent upward trend from 80 days in 2018 to 152 days in 2022, before decreasing to 133 days in 2023. This reflects an overall lengthening of the combined inventory processing and receivable collection periods, indicating extended timeframes for managing working capital, with some recent efficiency gains.

Overall Insights

Across the reviewed periods, there is evidence of elongation in both inventory turnover and receivable collection times, contributing to a prolonged operating cycle. The peak values observed in 2022 suggest potential operational challenges or changes in business conditions leading to slower asset utilization. However, the reductions noted in 2023 imply efforts toward improvement in working capital management, enhancing liquidity and operational efficiency.

Payables Turnover

The payables turnover ratio demonstrates a declining trend from 3.54 in 2018 to a low of 2.18 in 2022, followed by a slight recovery to 2.65 in 2023. This indicates a reduction in the frequency with which the company settles its payables over the years, implying a slower payment cycle, particularly notable between 2020 and 2022.

Average Payables Payment Period

The average payables payment period shows an increasing pattern, rising from 103 days in 2018 to a peak of 168 days in 2022. This confirms the elongation in the time the company takes to pay its suppliers. In 2023, there is a noticeable decrease to 138 days, suggesting a partial improvement in payment timeliness, although still considerably longer than earlier years.

Overall Insights

The inverse relationship between the payables turnover ratio and the average payment period is consistent across the observed timeframe. The extension of the payment period suggests the company may have been managing cash flows more conservatively or facing challenges in settling liabilities promptly during the middle years, particularly in 2021 and 2022. The partial reversal of this trend in 2023 indicates a potential return to more timely payments.

Average Inventory Processing Period

The average inventory processing period increased significantly from 41 days in 2018 to a peak of 99 days in 2022, before declining slightly to 89 days in 2023. This indicates a trend of progressively slower inventory turnover, suggesting challenges in inventory management or changes in sales velocity during this timeframe.

Average Receivable Collection Period

The average receivable collection period showed some variability. It decreased slightly from 39 days in 2018 to 37 days in 2019, then rose steadily to 53 days by 2022, followed by an improvement to 44 days in 2023. This pattern suggests that while the company experienced longer collection times through 2022, the efficiency of receivables management improved in the most recent year.

Average Payables Payment Period

The average payables payment period increased consistently from 103 days in 2018 to a peak of 168 days in 2022, before decreasing to 138 days in 2023. The extended payment periods indicate a growing reliance on supplier financing, possibly as a working capital strategy, with some reduction in 2023.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the period, indicating that the company generally collected cash from receivables before paying its suppliers. However, it declined from -23 days in 2018 and 2019 to -7 days in 2020, then briefly turned positive at 2 days in 2021. It reverted to negative in 2022 (-16 days) and slightly increased to -5 days in 2023. This fluctuation suggests variations in the efficiency of managing operating cash flow, with the company maintaining an overall favorable cycle but experiencing some volatility.