Medtronic PLC (NYSE:MDT)

The analysis of the key financial ratios over the observed quarterly periods reveals several notable trends in working capital management and operational efficiency.

Inventory Turnover

The inventory turnover ratio showed an initial upward trend from 2.1 to a peak of 2.47 around mid-2021, indicating improved efficiency in inventory management during that period. However, from late 2021 onwards, the ratio generally declined to about 1.95 by late 2025, implying slower inventory movement and potentially higher inventory holding levels in later periods.

Receivables Turnover

This ratio remained relatively stable around 5.2 to 5.8 across the periods, with minor fluctuations but no sustained trend upwards or downwards. This stability suggests consistent effectiveness in managing credit sales and collections.

Payables Turnover

Payables turnover exhibited more variability, initially fluctuating between 5.56 and 4.46, then stabilizing around the lower 4.6 to 5.1 range in later quarters. This may denote a strategic extension of payment terms or slower payments to suppliers, especially noticeable with some peaks and troughs throughout the timeline.

Working Capital Turnover

An upward spike was observed around late 2021 and early 2022, reaching a peak of 3.84, indicating enhanced efficiency in generating sales from working capital. Following that, the ratio declined closer to 2.5 but experienced a subsequent recovery above 3.0 in some quarters towards the end of the period, demonstrating fluctuating but generally improved utilization of working capital compared to the start of the series.

Average Inventory Processing Period (Days)

The average inventory processing period decreased from 174 days to a low of 148 days by mid-2021, consistent with the increase in inventory turnover during that time. Subsequently, this period gradually increased again, reaching values close to or exceeding the initial levels (around 187 days) in the later periods, aligning with the reduced inventory turnover ratios.

Average Receivable Collection Period (Days)

This period remained relatively stable in the range of 62 to 71 days throughout, showing consistent collection practices without major changes over time.

Operating Cycle (Days)

The operating cycle generally shortened from 238 days to 211 days by mid-2021, reflecting improved operational efficiency, before extending again to around 254 days in the most recent periods, indicating a lengthening in the overall time to convert inventory and receivables into cash.

Average Payables Payment Period (Days)

The payables payment period showed an increase from 66 days to a peak of 91 days around early 2023, followed by fluctuations mostly between 65 and 79 days. The longer payment periods may suggest deliberate management of payables to balance cash outflows.

Cash Conversion Cycle (Days)

The cash conversion cycle showed a decline from 172 to a trough near 143 days by early 2021, indicating quicker conversion of resources into cash. In later periods, it lengthened again to levels between approximately 166 and 189 days, signifying a slowdown in cash flow conversion efficiency compared to the best performing earlier quarters.

Overall, the data indicates a period of improving efficiency in working capital and operational cycles up to mid-2021, followed by a gradual retreat towards less efficient turns and longer operational cycles in subsequent years. Inventory management and cash flow conversion efficiency appear to have deteriorated somewhat after their peak improvements, while receivables management remained largely consistent. Payables management shows a strategic extension in payment terms, likely aimed at optimizing liquidity.

The cost of products sold, excluding amortization of intangible assets, exhibits a fluctuating but overall increasing trend over the analyzed periods. Starting from approximately $2.51 billion in July 2020, it experiences periods of decline and rise, with notable increases observed around early 2023 and throughout 2024, peaking at values above $3 billion in the most recent quarters. This pattern suggests variability in production or procurement costs with a general upward movement, potentially indicating increased sales volumes or rising input costs.

Inventories display a steady upward trajectory throughout the timeframe. Beginning at about $4.55 billion in mid-2020, the inventory levels gradually increase, reaching over $6.15 billion by late 2025. This consistent growth in inventory could reflect stockpiling strategies, expansion of product lines, or preparation for anticipated demand. However, the sustained increase also raises considerations regarding inventory management efficiency and potential risks related to obsolescence or carrying costs.

The inventory turnover ratio, which measures how efficiently inventory is converted into sales, shows a declining trend from 2.1 times in July 2020, dipping below 2 times around late 2022 and early 2023, before experiencing minor fluctuations around the 2 times mark in subsequent periods. This decline followed by stabilization suggests that the rate at which inventory is sold and replaced slowed down during the middle of the reviewed period but then showed some improvement or stabilization. The decrease in turnover ratio amid rising inventory levels may indicate less efficient inventory management or slower sales relative to inventory accumulation during certain quarters.

Cost of Products Sold

Fluctuating with an overall increase, peaking above $3 billion in the latest quarters.

Inventories

Steady increase from approximately $4.55 billion to over $6.15 billion, indicating stock growth.

Inventory Turnover Ratio

Gradual decline from 2.1 to near 2.0 with minor fluctuations, suggesting decreased efficiency in inventory utilization during the mid-period followed by stabilization.

The financial data reveals several notable trends and patterns over the analyzed periods.

Net Sales

Net sales experienced fluctuations across the quarters. Starting at 6,507 million USD in July 2020, sales increased significantly reaching peaks around 8,544 million USD in April 2023 and 8,961 million USD in October 2025. Periodic declines are observed, for instance in July 2022 and July 2023, suggesting some seasonal or market-driven variability. Overall, the trend is moderately upward with recurring fluctuations.

Accounts Receivable, Less Allowances and Credit Losses

Accounts receivable generally increased over time, starting at 4,876 million USD in July 2020 and rising to 6,389 million USD by October 2025. This steady increase reflects the expanding volume of credit extended to customers or longer collection periods. Occasional dips appear minor and short-lived, indicating relatively stable credit management practices throughout the periods.

Receivables Turnover Ratio

The receivables turnover ratio exhibits slight variability but remains relatively stable between approximately 5.15 and 5.85. The ratio indicates how efficiently receivables are collected. Despite fluctuations, there is no significant long-term trend upward or downward, implying consistent effectiveness in accounts receivable collection processes over time.

In summary, net sales demonstrate a growth trajectory with some intermittent decreases, accounts receivable steadily rise indicating increased credit exposure or sales on credit, and receivables turnover ratio remains stable reflecting maintained efficiency in collection. Together these data points suggest a growing business with largely consistent credit management practices despite fluctuations in sales volumes.

The analysis over the observed quarters reveals several noteworthy trends and fluctuations in the specified financial items.

Cost of Products Sold, Excluding Amortization of Intangible Assets

The cost of products sold demonstrated variability across the periods. Initial values rose from approximately 2,505 million USD in mid-2020 to peaks around 3,045 million USD by early 2024 before experiencing periodic declines. These fluctuations suggest cyclical cost patterns with intermittent increases potentially linked to production scale or raw material costs. The overall trend indicates a modest upward trajectory with some volatility in the more recent quarters.

Accounts Payable

Accounts payable figures show an overall increasing trend from approximately 1,720 million USD in mid-2020 to over 2,580 million USD by late 2025. There are observable short-term oscillations, with occasional decreases but an underlying pattern of growth. This increase in payables may indicate extended credit terms or increased procurement activities, reflecting either expansion or changing supplier payment policies.

Payables Turnover Ratio

The payables turnover ratio exhibits a declining pattern over the periods, starting around 5.56 and decreasing towards a range near 4.6 in the later quarters. This decreasing ratio suggests that the company is taking longer to pay its suppliers as compared to earlier periods. The decline in turnover ratio, combined with increasing accounts payable, possibly indicates a strategic adjustment in managing cash flows or negotiations favoring elongated payment terms.

In summary, the cost of products sold has generally trended upwards with fluctuations, accounts payable have steadily increased, and the payables turnover ratio has decreased, pointing to longer payment cycles. This combination of trends may reveal a shift towards more extended supplier payment terms alongside managing higher costs, which could impact working capital efficiency.

Working Capital

The working capital exhibits notable fluctuations over the observed periods. It started at a moderately high level, reaching its peak around October 2021, and then experienced a significant decline by April 2022. Following that drop, it remained relatively volatile, showing intermittent rises and falls but generally staying below the earlier peak values. Toward the most recent periods, there is a moderate upward trend, indicating some recovery or improvement in liquidity management.

Net Sales

Net sales show variability but maintain an overall upward trajectory through several quarters. Starting from a base level in July 2020, sales generally increased with minor fluctuations, reflecting ongoing demand or pricing adjustments. Noteworthy dips occur sporadically, but subsequent periods indicate a rebound. The general pattern is indicative of growth with cyclical short-term variances, possibly due to market conditions or seasonal effects.

Working Capital Turnover

The working capital turnover ratio demonstrates significant variation across the quarters. Initially, it hovers around values slightly above 2, suggesting moderate efficiency in utilizing working capital to generate sales. From early 2022 through mid-2023, the ratio rises substantially, peaking at values around 3.8, indicating improved efficiency during that stage. Subsequently, this efficiency metric shows a declining trend, dropping below previous peaks toward the later periods. The fluctuations may reflect changing operational efficiency, inventory management, or receivables collection dynamics impacting the firm's ability to convert working capital into sales effectively.

Overall Insights

There is a discernible inverse relationship between working capital levels and turnover ratios in several periods, particularly evident when working capital falls sharply, and turnover spikes. This implies more effective use of working capital during times of reduced liquidity. Meanwhile, net sales exhibit a positive but somewhat variable trend, suggesting steady revenue performance despite operational variations. The recent periods show signs of stabilization in both liquidity and sales metrics, though efficiency in working capital deployment seems to have softened after previous peaks.

Inventory Turnover Ratio

The inventory turnover ratio exhibited an initial upward trend from 2.1 in the third quarter of 2020 to a peak of 2.47 by the third quarter of 2021. This suggests an improvement in inventory management during this period, as the company was able to sell and replace its inventory more frequently. However, from late 2021 onwards, the ratio showed a declining tendency, decreasing to approximately 1.91–1.95 levels in early 2023 and fluctuating slightly around 2.0 in subsequent quarters. Notably, the ratio never significantly recovered to the peak levels seen in mid-2021 and showed a general downward movement toward the end of the observed timeline.

Average Inventory Processing Period (Days)

Corresponding inversely with the inventory turnover ratio, the average inventory processing period decreased from 174 days in mid-2020 to around 148 days by mid-2021, indicating faster inventory processing and turnover. Thereafter, the processing period began to lengthen again, rising steadily to reach 190 days by early 2023. Following that peak, there was some variation, with processing periods oscillating mostly between 170 and 190 days. The longer processing periods towards the end of the period suggest a slowdown in inventory turnover compared to the peak efficiency observed around mid-2021.

Overall Insight

The data presents a clear inverse relationship between the inventory turnover ratio and the average inventory processing period, typical of inventory management dynamics. The company improved its inventory efficiency up to mid-2021, achieving quicker turnover and reduced holding times. However, from late 2021 onward, there was a reversal in this trend, reflecting either operational challenges or strategic shifts leading to slower inventory movement. The fluctuations and lack of sustained improvement in later periods imply that the company faced some difficulties in maintaining optimal inventory levels or experienced changes in demand or supply chain factors that extended the inventory holding period.

Receivables Turnover Ratio

The receivables turnover ratio exhibits moderate fluctuations over the observed periods, ranging roughly between 5.15 and 5.85. Initially, a declining trend is noted from 5.73 to 5.21 between July and October 2020. Subsequently, the ratio increases reaching a peak around early 2022 at approximately 5.85. Post this peak, the ratio gradually declines and stabilizes around the mid 5.2 to 5.4 range through late 2024 and 2025. These movements suggest that the efficiency of converting receivables into cash has experienced periodic variations but generally remains consistent within a narrow band over the long term.

Average Receivable Collection Period

The average collection period, measured in days, shows an inverse pattern relative to the receivables turnover ratio, as expected. Beginning at 64 days in mid-2020, the period lengthens to around 70 days in late 2020 and early 2021, indicating slower collection. A gradual improvement occurs with the collection period shortening to approximately 62 days by mid-2022, reflecting faster receivable turnover. However, from late 2022 onwards, the collection period again lengthens slightly and fluctuates between 67 and 71 days, pointing to a modest slowdown in collections but remaining relatively stable within this range toward 2025.

Overall Insights

The data demonstrate cyclical variations in the receivables management efficiency across the quarters. The reciprocal relationship between receivables turnover and collection period holds consistently, with periods of faster turnover aligning with shorter collection periods and vice versa. Despite these fluctuations, the company maintains a generally steady receivables cycle, with no extreme deviations that might indicate significant issues in credit management or cash flow related to receivables.

The analysis of the quarterly financial data reveals distinct trends in inventory management, receivable collection, and the overall operating cycle over the observed periods.

Average Inventory Processing Period

The average inventory processing period initially showed a declining trend from 174 days to 148 days up to July 2021, indicating an improvement in inventory turnover. However, from that point onward, there is a general upward trend with some fluctuations, reaching peaks around 190-191 days in early 2023 and again in late 2023, before slightly decreasing and then rising toward 187 days by the end of the timeline. This suggests that inventory turnover slowed after mid-2021, possibly indicating challenges in inventory management or stock accumulation.

Average Receivable Collection Period

The receivable collection period remained relatively stable throughout the periods, fluctuating mildly within a narrow range of approximately 62 to 71 days. This stability suggests consistent effectiveness in credit and collections practices, with minor increases and decreases but no clear long-term trend of improvement or deterioration.

Operating Cycle

The operating cycle, which combines both inventory processing and receivable collection periods, starts at 238 days and shows a decreasing trend until mid-2021, reaching a low of 211 days. From there, the operating cycle generally increases, with some volatility, peaking at 260 days in early 2023. In the latter periods, it stabilizes in the range of mid-240s to mid-250s days. This pattern mirrors the inventory processing trend more closely and indicates that changes in inventory turnover are the main driver of operating cycle fluctuations, potentially affecting working capital efficiency.

Payables Turnover Ratio

The payables turnover ratio exhibits fluctuations over the analyzed periods, with values ranging from a low of approximately 4.03 to a high near 5.67. Initially, there is a slight decline from 5.56 to around 4.46, followed by intermittent recoveries and declines. Notably, after reaching a low point of 4.03, the ratio increases again, approaching values above 5.0 in some later quarters, before stabilizing near 4.6 towards the end of the timeline. This pattern reflects variability in the speed at which the company settles its payables over time.

Average Payables Payment Period (Days)

The average payables payment period, measured in days, generally moves inversely to the payables turnover ratio, as expected. Observations show a trend of extending payment periods over several quarters, rising from 66 days to a peak of 91 days. This indicates the company took longer to pay suppliers during this phase. Subsequently, the days decrease again to the mid-60s before fluctuating in the 70s range. The payment period remains relatively elevated and variable towards the end of the observed timeline, suggesting a strategic or operational decision affecting payment timing.

Overall Insights

The relationship between the payables turnover ratio and the average payables payment period is consistent with typical financial behavior; as payment periods lengthen, turnover ratios decline and vice versa. The data indicate periods of extended liquidity management, where the company delayed payables, possibly to optimize cash flow. Fluctuations in these metrics suggest adjustments in working capital strategies possibly influenced by market conditions, supplier negotiations, or operational considerations. The variability in recent periods might also indicate an adaptive approach to evolving business environments or seasonal factors impacting payables management.

The analysis of the financial operational cycle metrics over the reviewed periods reveals several notable trends and fluctuations.

Average Inventory Processing Period

The average inventory processing period exhibits a generally cyclical pattern with fluctuations across the quarters. Starting at 174 days, it initially decreased reaching a low around 148 days before gradually increasing again, peaking near 191 days in mid-2023. Subsequently, it shows some decline and variability, ending close to 187 days by late 2025. This volatility suggests periods of changing inventory management efficiency or variations in inventory turnover rates, potentially influenced by seasonal or operational factors.

Average Receivable Collection Period

This metric remains relatively stable throughout the periods, hovering mostly in the range of 63 to 70 days. Minor fluctuations are observed, with no clear long-term trend upwards or downwards. The steadiness implies consistent credit and collection policies, leading to a reliable cycle time in collecting receivables.

Average Payables Payment Period

The average payables payment period displays more irregular movements. From an initial 66 days, it rises and dips over time, reaching peaks around 91 days and values around 72-79 days in other periods. The variability suggests fluctuating payment practices, possibly indicating shifts in supplier negotiation strategies or cash management policies. Notably, there is a significant increase to 91 days at one point, indicating extended payment terms or delayed payments during that quarter.

Cash Conversion Cycle

The cash conversion cycle (CCC) trends demonstrate variability that broadly mirrors the combined effects of the inventory, receivables, and payables periods. Starting at 172 days, it decreases to about 143 days by early 2021, reflecting improved operational efficiency. However, it then rises again to peak values around 183-189 days during 2023, and subsequently fluctuates but remains relatively elevated above 160 days towards late 2025. This indicates that the overall time taken to convert investments in inventory and other resources back into cash has faced periods of elongation, potentially impacting liquidity and working capital effectiveness.

In summary, the data suggests moderate volatility in inventory management and payables practices, with receivables collection remaining steady. The cash conversion cycle reflects these variations and signals periods of both improved and reduced operational efficiency in managing working capital over the evaluated timeframe.