Parker-Hannifin Corp. (NYSE:PH)

Inventory Turnover

The inventory turnover ratio exhibited a generally decreasing trend from late 2016 through 2022. Starting at 5.93 in September 2016, the ratio rose slightly to peak around 6.64 by September 2017, indicating relatively efficient inventory management during this period. However, from late 2018 onward, the ratio steadily declined, reaching a low of 3.66 in September 2022. This decline suggests a reduction in the efficiency of converting inventory into sales over time.

Receivables Turnover

The receivables turnover ratio showed some fluctuations but remained relatively stable overall. Early values around 6.23 in late 2016 increased gradually to approximately 7.49 by early 2019, implying improved effectiveness in collecting receivables. Subsequent periods showed oscillations between 6.16 and 7.49, without a distinct upward or downward trend, indicating consistent but variable collection performance through to the end of 2022.

Payables Turnover

The payables turnover ratio demonstrated variability with periods of increase and decline. It increased from about 7.07 in late 2016 to a high near 9.25 in mid-2020, suggesting faster payment of obligations during this time. Afterward, the ratio generally trended downwards, reaching a value of 6.07 by December 2022, indicating a slower pace in settling payables in the latter part of the series.

Working Capital Turnover

The working capital turnover ratio showed considerable volatility across the periods. After a decrease from 8.69 in late 2016 to as low as 2.56 in late 2022, the series was punctuated by sharp peaks such as 9.78 in the third quarter of 2022 and 10.86 later in the same year. This pattern reflects irregular efficiency in using working capital to generate revenue, with significant fluctuations that may correspond to changing operational conditions.

Average Inventory Processing Period

The average inventory processing period ranged from 62 days in 2016 to a high of 100 days in late 2022. Initially, there was a general downward trend from around 65 days in late 2016 to a low of approximately 55 days in September 2017, indicating improved inventory turnover speed. However, a subsequent gradual increase through 2019 and onward led to a much longer processing period, peaking near 100 days by the end of 2022, signaling slower inventory movement over recent years.

Average Receivable Collection Period

The average collection period for receivables remained fairly stable, oscillating in the range of about 49 to 59 days throughout the period. The data shows no major upward or downward trend, with values around mid-50 days consistently, suggesting steady practices in credit management and collection efforts.

Operating Cycle

The operating cycle, combining inventory and receivable periods, remained within a narrow band of approximately 110 to 131 days for most of the timeframe until a notable increase to around 159 days in September 2022. This jump indicates an overall lengthening of the operational process from inventory acquisition to cash collection during that later period.

Average Payables Payment Period

The average payables payment period varied between 39 days and 64 days. It decreased from around 52 days in late 2016 to a low of 39 days in mid-2020, reflecting faster payment cycles. After mid-2020, the period extended again, reaching about 64 days by the third quarter of 2022, indicating a trend toward slower payment to suppliers in recent times.

Cash Conversion Cycle

The cash conversion cycle exhibited moderate fluctuations between approximately 61 and 76 days until 2021, reflecting the net days between cash outflow and inflow. A significant increase occurred in late 2022, reaching 90 to 95 days, suggesting a lengthening in the time required to convert investments in inventory and receivables back into cash. This indicates a potential liquidity concern or operational inefficiency developing toward the end of the period analyzed.

The analysis of the quarterly financial data reveals notable trends and shifts over the observed periods.

Cost of Sales

The cost of sales figures exhibit considerable fluctuations across quarters. Starting from approximately 2,106,006 thousand USD in September 2016, the values generally increase, reaching peaks such as 2,832,885 thousand USD in June 2018. Thereafter, fluctuations occur with a noticeable rise again toward the end of the period, peaking at 3,236,812 thousand USD in December 2022. Overall, there is a tendency toward an upward trend in cost of sales over the long term, with some short-term variability.

Inventories

Inventories show a general increase throughout the examined timeline. Beginning around 1,247,972 thousand USD in September 2016, the inventory values rise steadily, reaching over 3,130,182 thousand USD by September 2022. This indicates an expansion in stock levels, particularly significant from mid-2021 onward, where inventories surpass 2,000,000 thousand USD and continue increasing sharply.

Inventory Turnover Ratio

The inventory turnover ratio, which indicates the number of times inventory is sold and replaced over a period, demonstrates a declining trend. Starting at approximately 5.93 (noted from March 2017 onward), the ratio gradually decreases to a low near 3.66 by September 2022, with slight recovery to 3.86 in December 2022. This decline suggests that the company is turning over its inventory less frequently, possibly reflecting slower movement of goods or increased stock holdings relative to sales.

In summary, the data points to a rising cost of sales coupled with steadily growing inventory levels. Meanwhile, the decreasing inventory turnover ratio hints at a slower rate of inventory utilization. Such trends may indicate changes in operational efficiencies, demand dynamics, or supply chain management strategies over the reviewed quarters.

Net Sales Trend

Net sales exhibit a generally upward trend from September 2016 through December 2022. Starting at approximately 2.74 billion US dollars in September 2016, sales experienced gradual growth with fluctuations. Notably, net sales peaked at over 4.6 billion US dollars in the last quarter of 2022, reflecting substantial growth compared to earlier periods. There are intermittent declines, such as in the middle quarters of 2020, likely indicating external factors influencing demand, but overall the trajectory remains positive, indicating expanding operations or increasing market demand over the analyzed timeframe.

Trade Accounts Receivable, Net

Trade accounts receivable, net, also shows a progressive increase over the same period, starting from about 1.5 billion US dollars in September 2016 and rising to approximately 2.6 billion US dollars by the fourth quarter of 2022. There are periods of relative stability or minor fluctuations, but the general direction is upwards. This rise corresponds with the increasing net sales trend, suggesting that as sales grow, the company extends more credit to customers or encounters longer collection periods. Additionally, sizable increases in receivables can imply higher sales on credit terms, with potential implications for cash flow management.

Receivables Turnover Ratio

The receivables turnover ratio fluctuates between a low of about 6.16 and a high of approximately 7.49 throughout the observed quarters. This ratio exhibits moderate variability but remains relatively stable within this range, without a clear long-term trend upwards or downwards. Periods of higher turnover, such as in late 2018 and early 2019, suggest more efficient collection of receivables, while declines imply slower collection or increased credit sales. The ratio generally correlates inversely with the level of trade accounts receivable; however, the fluctuations do not indicate any severe deterioration or major improvement in receivables management.

Overall Financial Patterns and Insights

The data suggests the company is experiencing steady growth in sales volume over the examined six-year period, accompanied by an increase in accounts receivable consistent with expanding sales. The receivables turnover ratio remains relatively steady, indicating consistent credit management practices. The modest variability in turnover implies occasional shifts in collection efficiency, but no persistent trend toward worsening or improving receivables settlement speed. The upward movement in net sales coupled with growing receivables highlights the importance of ongoing monitoring of collections to maintain healthy cash flows amid business expansion.

Cost of Sales

The cost of sales demonstrates significant fluctuations over the analyzed periods. Starting from approximately 2.1 billion USD in September 2016, it generally increased to peak near 2.8 billion USD around mid-2018 and early 2019. A notable decline occurred mid-2020, with costs falling below 2.4 billion USD, possibly due to external economic factors. Following this dip, there was a recovery trend from late 2020 onward, reaching a new high of over 3.2 billion USD by the end of 2022. This pattern indicates cyclicality with an overall upward trend in cost of sales across the six-year timeframe.

Accounts Payable, Trade

Accounts payable values parallel the cost of sales trends, beginning near 1.02 billion USD at the end of 2016 and generally rising toward approximately 1.7 billion USD by the close of 2019. After a decline in early 2020 to around 1.1 billion USD, a consistent increase resumed, culminating near 2 billion USD at the end of 2022. This suggests that trade payables expanded notably during periods of increased cost activity, and contracted during downturn phases, reflecting a potential alignment between purchasing obligations and production or sales activity.

Payables Turnover Ratio

The payables turnover ratio reveals more nuanced insights, fluctuating between a low of about 5.68 and a high exceeding 9.25. Early periods (mid-2017 to 2019) showed relatively higher turnover ratios, often above 7, indicating quicker payment cycles relative to payables held. From mid-2020, a declining trend in turnover ratio is observed, dropping to below 6 by late 2022, suggesting a lengthening of payment periods or possibly a strategic extension of credit terms with suppliers. These changes in turnover correspond temporally with cost of sales shifts, reflecting adjustments in working capital management possibly responsive to market conditions.

Summary of Financial Dynamics

The analyzed data highlights an overarching increase in operational scale as evidenced by rising costs and associated payables over the six-year horizon. Conversely, working capital efficiency, as measured by the payables turnover ratio, shows variability with a recent trend toward slower turnover, which may impact liquidity and supplier relationships. The mid-2020 period stands out as a disruption point with declines in both sales costs and payables, followed by a recovery and expansion phase. Overall, the financial data suggests a company navigating cyclical market conditions through adjustments in cost management and payment practices.

The working capital exhibits notable fluctuations across the reported periods. Initially, it demonstrates a moderate decline from September 2016 through June 2017, followed by a pronounced increase peaking around June 2019. Subsequently, there is a sharp decrease toward the end of 2019, with values stabilizing at a lower level through much of 2020. From late 2020 to mid-2022, the working capital generally trends upward again, reaching a peak in June 2022, before dropping sharply in subsequent quarters.

Net sales present a general upward trajectory over the entire period, despite some intermediate variability. Starting from approximately 2.74 billion in September 2016, sales increase steadily with some periods of minor decline or stagnation, particularly in late 2018 and early 2020. The data from the latter quarters of 2020 onward exhibit a consistent strengthening trend, culminating in record sales values above 4 billion by the end of 2022.

The working capital turnover ratio, calculated in selected periods beginning in June 2017, reveals substantial variability. Early in the coverage, the ratio mostly falls between approximately 6.8 and 8.7, indicating a relatively efficient use of working capital in generating sales. However, there are evident sharp declines at the end of 2019 and in late 2022, with ratios dropping to around 2.5 to 3.5. This suggests periods where working capital levels were disproportionately high relative to sales or sales volume diminished. Conversely, some quarters, such as in mid-2019 and early 2023, show ratios rising above 9.0 and even exceeding 10, pointing to improved operational efficiency or more optimized working capital management during those intervals.

In summary, the financial data depict a company managing fluctuating working capital levels amidst a broadly growing sales environment. The wide swings in working capital turnover indicate episodic changes in operational efficiency or inventory and receivables management. The sustained growth in net sales, especially in recent quarters, suggests positive market conditions or expanded business activities despite the variations in working capital management metrics.

Working Capital

Fluctuated significantly with peaks in mid-2019 and mid-2022, and troughs notably at the end of 2019 and late 2022.

Net Sales

Exhibited an overall upward trend from roughly 2.74 billion to over 4.6 billion, with minor intermittent declines.

Working Capital Turnover Ratio

Varied broadly, generally between 6.7 and 8.7, sharply decreasing in some quarters but rising above 9.0 in others, indicating changes in efficiency or working capital management.

The analysis of the quarterly financial ratios related to inventory management reveals distinct trends over the observed periods.

Inventory Turnover Ratio

The inventory turnover ratio is available from March 31, 2017, onward, exhibiting fluctuations but an overall declining trend in recent periods. Initially, the ratio oscillated around values slightly above 6, peaking at 6.64 in September 30, 2017. However, from late 2019 onwards, the ratio demonstrated a gradual decrease, falling below 5 by September 30, 2021. This downward movement intensified towards the end of the dataset, reaching its lowest points of 3.66 and 3.86 in September and December 2022, respectively. Such a decline in turnover ratio suggests that the company has been selling and replacing its inventory less frequently over time, potentially indicating slower inventory movement or accumulation of stock.

Average Inventory Processing Period (Days)

This metric further corroborates the observations from the turnover ratio. The average processing period ranged near 60 days during the early data points (2017), with a notable improvement seen in mid-2017 where it decreased to a low of 55 days, indicative of faster inventory processing. Starting around 2019, the processing period began to lengthen, reaching highs of 77 days between late 2020 and early 2021. The most significant increase is observed towards the last quarters of 2022, where the inventory processing period extends up to 100 days, indicating inventory remains on hand for a longer duration before being sold or used. This points to potential challenges in inventory management, slower sales, or supply chain inefficiencies during these recent quarters.

Summary of Trends and Possible Implications

Overall, the inverse relationship between inventory turnover ratio and average inventory processing period is consistent throughout the timeframe—when turnover decreases, days in inventory increase. The extended holding periods and reduced turnover in recent quarters may reflect changing market conditions, reduced demand, or operational inefficiencies affecting inventory flow. The sharp increase in days of inventory on hand toward the end of 2022 warrants attention, as prolonged inventory holding can lead to increased storage costs, potential obsolescence, and capital tied up in stock.

The receivables turnover ratio exhibits noticeable fluctuations over the observed periods, ranging between approximately 6.16 and 7.49. Starting with a turnover around the mid-6 range in late 2016 and early 2017, the ratio increased steadily to peak near 7.49 by the end of 2018. During 2019, the ratio fluctuated slightly but mostly remained above 7.0. There is a slight decline observed in 2020, with turnover values dropping toward the mid to high 6s. The ratio recovered somewhat in 2021 with figures again approaching or exceeding 7.0 but fell back below 7.0 by late 2022.

The average receivable collection period, which inversely correlates with receivables turnover, substantiates these observations. The days outstanding generally decreased from a high near 59 days in late 2016 and early 2017 to around 49-51 days during 2018 and 2019, indicating improved efficiency in collecting receivables. However, starting from 2020, the collection period began to rise again, with values oscillating between 49 and 59 days, suggesting some challenges in maintaining the previous collection efficiencies. Notably, the collection period peaked again at 59 days toward the end of 2022.

Receivables Turnover Ratio Trend

Initially ascending from roughly 6.23 to above 7.4 by late 2018, reflecting enhanced turnover efficiency.

Moderate volatility between 6.4 and 7.5 thereafter, with a mild declining tendency post-2019.

Late 2022 values indicate a downward adjustment, reaching near 6.66.

Average Receivable Collection Period Trend

Declined from approximately 59 days in early periods to near 49-51 days during 2018-2019, indicating faster collections.

Increased collection days after 2019, oscillating between 49 and 59 days, indicating less efficiency.

Highest recent value of 59 days at the end of 2022 suggests a reversal of earlier collection improvements.

Relationship Insights

The inverse movement between turnover ratio and collection period corroborates consistent measurement and reliable data trends.

The general improvement through 2017-2019 suggests effective credit and collections management during this period.

The post-2019 deterioration may reflect external pressures or internal challenges affecting receivables management.

Average Inventory Processing Period

The average inventory processing period demonstrates a general fluctuation over the analyzed timeframe. Starting with values in the mid-60s to 70s days range between 2016 and early 2020, there is a noticeable increase reaching 100 days by December 2020. Subsequently, the period decreases moderately, settling around the mid-90s by the end of 2022. This pattern suggests growing inefficiencies or changes in inventory management towards late 2020, followed by attempts or conditions leading to improved turnover though not returning to earlier lower levels.

Average Receivable Collection Period

The average receivable collection period remains relatively stable with slight variations between 49 and 59 days throughout the data series. There is no clear upward or downward long-term trend, indicating a consistent accounts receivable management practice. Minor fluctuations may be attributed to seasonal or market variations, but overall, the collection efficiency appears steady over time.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, displays a moderate cyclical pattern. It hovers generally around 110 to 130 days before experiencing a notable spike reaching a peak of 159 days in late 2020. Following this peak, the operating cycle decreases but remains elevated relative to earlier periods, ending near 150 days at the close of 2022. This increase aligns with the rise in inventory processing days, suggesting that inventory turnover significantly influenced the extended operating cycle during this period.

Payables turnover

The payables turnover ratio displays fluctuations over the observed periods starting from September 2016 through December 2022. Initially, between late 2016 and early 2017, the ratio increased from approximately 7.07 to a peak near 8.31 in early 2018, indicating faster payment to suppliers during this time frame. After this peak, the ratio experienced some variability but generally remained strong, hovering around values between 7.5 and 8.2 until early 2020.

From 2020 onward, a notable decline in the ratio occurs, with values falling from 9.25 in early 2020 to a low near 5.68 by late 2022. This decrease suggests that the company has been slowing its payment processes in the later periods, possibly extending the time taken to pay suppliers. The period surrounding the start of the COVID-19 pandemic shows a peak in turnover ratio (9.25), which then trends downward in subsequent quarters.

Average payables payment period

The average payables payment period, expressed in days, inversely tracks the payables turnover ratio, consistent with financial theory. Early observations from late 2016 to early 2017 show a reduction in payment days from approximately 52 days down to 44 days, corresponding to increasing turnover during the same timeframe.

Following this, the payment period stabilizes mostly within the 44 to 49 day range through late 2019. In the early months of 2020, the average payment period drops to its minimum around 39 days, aligning with the peak payables turnover noted during this period.

However, after this point, particularly through 2021 and into 2022, the payment period gradually lengthens, reaching values between 53 and 64 days, which corresponds to the downward trend in payables turnover ratio. This suggests an operational shift to a longer payment cycle, potentially reflecting changes in cash flow management or supplier negotiations.

Overall trends and insights

The data reflect an operational pattern where the company improved its payables turnover and shortened payment periods up to early 2020, indicating efficient supplier payment practices during those years. This was followed by a notable reversal during and after the onset of the global pandemic, characterized by an extension of payment cycles and a reduction in turnover ratio.

The increasing average payables payment period in recent years may imply strategic liquidity management or responses to external economic pressures. It will be important to consider the impact of these extended payment periods on supplier relationships and credit terms.

Average Inventory Processing Period

The average inventory processing period demonstrates variability over the observed quarters. Early data indicates days ranging around the low 60s to mid 60s in 2017 and 2018, followed by a generally stable trend in the high 50s to low 60s. However, starting in late 2019, this period begins to increase, reaching a peak of 100 days in December 2022. This upward trend suggests a lengthening time to process inventory, which could indicate slowing turnover or inventory build-up toward the end of the analyzed period.

Average Receivable Collection Period

The receivable collection period shows some fluctuations but generally remains within the range of approximately 49 to 59 days throughout the time frame. There is no clear long-term increasing or decreasing trend, with periodic rises and falls. Notably, the period dips in the early quarters of 2019 but rises again in late 2020 to early 2021 before stabilizing near mid-50s days towards the end of the period. This indicates that the company has maintained relatively consistent credit collection terms and performance.

Average Payables Payment Period

Payables payment period exhibits some variability, initially fluctuating between approximately 44 and 52 days in 2017 and 2018. A moderate decrease is observed towards mid-2020 with a low near 39 days, followed by a steady increase reaching around 64 days by December 2022. This increasing trend in payment period suggests the company has extended the time it takes to pay suppliers, which might be a strategy for managing cash flow amid changing business conditions.

Cash Conversion Cycle

The cash conversion cycle remains relatively stable around the mid-60s to mid-70s days from 2017 through 2019. Starting in 2020, it experiences an upward movement peaking at 95 days in December 2022. The increasing cash conversion cycle over recent periods points to longer durations required to transform investments in inventory and receivables into cash, potentially signaling stress in working capital management or operational challenges impacting liquidity.