Stryker Corp. (NYSE:SYK)

The financial ratios exhibit distinct patterns and trends across the observed periods, reflecting operational efficiency and cash flow dynamics.

Inventory turnover

The inventory turnover ratio shows a gradual decline from 1.73 in March 2018 to a low near 1.50 in mid-2020, indicating slower inventory movement during that period. Post mid-2020, the ratio improves steadily, reaching 1.85 by the third quarter of 2021 before slightly dipping again. This suggests recovering efficiency in inventory management towards the later periods.

Receivables turnover

Receivables turnover fluctuates with moderate variability, beginning around 5.66 in early 2018, peaking at 6.39 in the third quarter of 2020, and then stabilizing around 5.9 in the last few quarters. These figures indicate consistent ability to convert receivables into cash, with some improvement during 2020 followed by a return to prior levels.

Payables turnover

The payables turnover ratio demonstrates a general downward trend from a high of approximately 8.77 in March 2018 to a low near 5.44 by early 2022. The decreasing ratio suggests extended payment periods and potentially more relaxed credit terms from suppliers over time.

Working capital turnover

Working capital turnover exhibits significant volatility. It peaks at 4.17 in mid-2018, declines sharply to near 1.61 in late 2020, and then recovers to above 4.00 by early 2022. This fluctuation implies changes in efficiency in utilizing working capital to generate sales, with some operational challenges during 2019–2020 and subsequent improvement.

Average inventory processing period

The average inventory processing period gradually increases from 211 days in early 2018 to a peak around 244 days in 2019–2020, indicating slower inventory movement. Afterward, it decreases steadily to approximately 197 days by late 2021, reflecting enhanced inventory turnover and management efficiency.

Average receivable collection period

This period generally trends upward from 64 days in early 2018 to about 71 days in late 2018, suggesting slower collections. It then decreases to roughly 57 days in late 2020, indicating improved collection efficiency before stabilizing around 60–65 days in subsequent quarters.

Operating cycle

The operating cycle lengthened from 275 days in early 2018 to about 310 days in late 2020, implying a slower conversion of inventory and receivables into cash. It then shortens consistently towards 261 days by late 2021, evidencing operational improvements.

Average payables payment period

This metric increases from 42 days in early 2018 to a high of 67 days by late 2021, indicating that payments to suppliers are being delayed or stretched over longer periods, potentially as a liquidity management strategy.

Cash conversion cycle

The cash conversion cycle remains relatively high and quite volatile. It rises from 233 days in early 2018 to a peak above 260 days around late 2019 to mid-2020, then decreases substantially to approximately 194 days by late 2021. This trend shows initial deterioration in cash flow efficiency followed by marked improvement.

Cost of Sales

The cost of sales displays a generally increasing trend over the analyzed quarters from March 31, 2017, through March 31, 2022. Starting at $993 million in the first quarter of 2017, the figure rises with some fluctuations, reaching a peak of $1656 million in the fourth quarter of 2021 before slightly decreasing to $1541 million in the first quarter of 2022. Some notable upward jumps are observed in the fourth quarters of 2017, 2018, and 2020, which could indicate seasonal or periodic increases in production or sales activity.

Inventories

Inventories steadily increased during the same period, beginning at $2172 million in early 2017 and climbing to $3525 million by the first quarter of 2022. The progression shows a consistent accumulation of inventory stock, with gradual increases quarter-over-quarter and no significant drops. This persistent rise suggests ongoing investment in inventory, possibly to support expected sales growth or to buffer supply chain uncertainties.

Inventory Turnover Ratio

The inventory turnover ratio, available from the first quarter of 2018 onward, indicates how efficiently inventory is being utilized or sold. This ratio demonstrates a slight downward trend from 1.73 in early 2018 to a low around 1.50 in late 2020, before gradually improving and peaking at 1.85 by the third quarter of 2021. A subsequent slight decline to 1.77 by the first quarter of 2022 suggests some fluctuations in operational efficiency. Overall, the turnover ratio's recovery in the latest periods may reflect improved inventory management or increased sales velocity after earlier stagnation.

Overall Analysis

The data reveals a pattern of increasing inventory investment alongside rising cost of sales, indicating growth or scaling of operations. The inventory turnover ratio's initial decline followed by recovery suggests challenges in inventory management or sales capacity that were addressed over time. Seasonal spikes in cost of sales and steady inventory buildup highlight potential cyclical business patterns and strategic stockpiling. The relationship between these measures points to an evolving operational efficiency, where recent improvements in turnover ratio could be a positive sign of enhancing profitability or supply chain optimization.

The analysis of the quarterly financial data reveals several key observations regarding sales performance, accounts receivable, and receivables turnover over the examined periods.

Net Sales

Net sales demonstrated a generally upward trend from March 31, 2017, through March 31, 2022, with some fluctuations. Starting at approximately $2.96 billion in early 2017, sales increased steadily, reaching a peak of about $4.26 billion by the end of 2020. However, a significant decline occurred in mid-2020, with net sales dropping to roughly $2.76 billion, likely reflecting external market disruptions. Subsequently, net sales recovered strongly through 2021 and into early 2022, reaching over $4.7 billion before a slight decrease to $4.28 billion by March 31, 2022. The overall pattern indicates resilience and recovery following a temporary setback.

Accounts Receivable, Less Allowance

Accounts receivable increased in most quarters, generally tracking the sales growth pattern. From approximately $1.88 billion in March 2017, receivables rose to nearly $3.0 billion by early 2022. Notably, accounts receivable decreased during mid-2020, corresponding with the drop in net sales during the same period. Post-2020, receivables resumed an upward trajectory, suggesting consistent credit sales and effective collection management aligned with rising net sales. The relative stability of receivables in relation to sales throughout the periods suggests maintained credit terms and collection efficiency.

Receivables Turnover Ratio

The receivables turnover ratio exhibited variability without a sustained directional trend. Beginning with values around 5.66 to 6.39 in 2017 and 2018, the ratio declined to its lowest near 5.14 in early 2019. Following this, the ratio improved to approximately 6.39 by late 2020, indicating a slight acceleration in receivables collection at that time. In 2021 and early 2022, the turnover ratio stabilized between roughly 5.6 and 5.9, signifying steady collection efficiency relative to the receivables outstanding. These fluctuations may reflect changes in credit policy, payment cycles, or market conditions but largely show consistent management of accounts receivable.

In summary, the data reflect strong sales growth interrupted by a temporary downturn in 2020, with a subsequent rebound. Accounts receivable correspondingly fluctuated but generally mirrored sales trends, while receivables turnover remained relatively stable, indicating consistent collection practices over the periods analyzed.

Cost of Sales

The cost of sales exhibited a general upward trend across the analyzed quarters from March 2017 to March 2022. Starting at approximately $993 million in the first quarter of 2017, this figure experienced periodic increases and some fluctuations, culminating at $1,541 million in the first quarter of 2022. Notable increases in cost of sales were observed at the end of each calendar year, particularly in December quarters, indicating possible seasonal patterns or year-end operational intensifications. The cost of sales showed a significant rise during 2020 and 2021, peaking at $1,656 million in December 2021 before slightly declining in March 2022.

Accounts Payable

Accounts payable demonstrated a consistent growth trend over the same period. Beginning at $456 million in March 2017, the balance steadily rose with minor fluctuations to reach $1,084 million by the end of the first quarter of 2022. The increases in accounts payable coincided generally with rises in cost of sales, suggesting expansion in purchasing activities or extended credit terms. Several significant jumps occurred in late 2020 and throughout 2021, with accounts payable increasing notably in December 2020 and continuing upward through 2021, peaking at $1,129 million in March 2022.

Payables Turnover Ratio

The payables turnover ratio demonstrated a decreasing trend overall from 8.77 in March 2017 to 5.75 in March 2022. This ratio, which reflects the frequency of payments made to suppliers relative to accounts payable, indicates a slowing in the rate at which payables are settled over time. The decline suggests either elongation in payment terms or slower payment cycles. There were periodic fluctuations within this downward trajectory, including a notable dip during 2021, implying variability in payment practices. Lower turnover ratios in the later periods correspond with substantial increases in accounts payable, reinforcing the inference of longer payment durations or increased utilization of supplier credit.

Overall Analysis

The combined trends in cost of sales, accounts payable, and payables turnover suggest a period of expanding operational activity alongside a tendency to extend payment terms. The rising cost of sales reflects growth in business volume or increased input costs, while the parallel increase in accounts payable indicates that suppliers are being owed larger amounts. The declining payables turnover ratio reinforces that the company is taking longer on average to settle these liabilities. These patterns could reflect strategic working capital management or cash flow considerations in response to market conditions.

The working capital figures demonstrate considerable variability throughout the periods observed. Initially, working capital decreased from 5335 million USD at the end of March 2017 to a low point of 3051 million USD at the end of March 2018, followed by a recovery to a peak of 8856 million USD at the end of December 2020. Subsequently, it declined sharply to 4666 million USD at the end of December 2020 and remained moderately stable around 4300-5500 million USD through to the end of March 2022.

Net sales show a somewhat cyclical pattern with a general upward trend over the entire duration. Starting from 2955 million USD in March 2017, there is a rise to the highest point of 4701 million USD at the end of December 2021, albeit with a notable dip around June 2020 to 2764 million USD, which may correspond with external market disruptions. By March 2022, net sales slightly declined to 4275 million USD but remained elevated compared to earlier years.

The working capital turnover ratio, which measures the efficiency with which working capital is used to generate sales, exhibits diverse fluctuations. Initially missing for several quarters, the ratio was recorded starting from September 2017 at 2.76 and saw a peak value of 4.17 in June 2018. After this peak, the ratio generally declined, reaching a trough of approximately 1.61-1.68 during the second and third quarters of 2020, coinciding with the dip in net sales and peak working capital levels. This drop indicates lower efficiency in using working capital during this period.

From late 2020 onward, the working capital turnover ratio recovered, increasing to values above 3.0 in most quarters, with a maximum of 4.04 at the end of March 2022. This suggests an improvement in working capital management and sales generation efficiency towards the end of the period.

In summary, the financial data reflects periods of operational challenge and recovery. Working capital experienced significant swings, showing less stability, while net sales grew steadily despite a temporary decline linked to external factors. The working capital turnover ratio's fluctuation underscores variable efficiency in resource utilization, with recent improvements indicative of better capital management and stronger sales performance.

The inventory turnover ratio exhibits a generally stable pattern with a slight improvement towards the end of the observed periods. Starting from 1.73 in March 2018, the ratio gradually declines to a low of around 1.50 in mid-2020 before showing a steady increase, reaching 1.85 by December 2021. This trend suggests an initially slower movement of inventory that improves over time, indicating enhanced efficiency in managing inventory resources in the latter stages.

The average inventory processing period, measured in days, mirrors the inventory turnover ratio inversely, as expected. From 211 days in March 2018, the processing period expands gradually, peaking at 244 days during the middle of 2020. Following this peak, the period shortens substantially to 197 days by September 2021, before slightly lengthening again to 206 days in March 2022. This reduction indicates an acceleration in inventory processing times, corresponding to the improved turnover ratio and suggesting a more effective inventory management process during the later periods.

Inventory Turnover Ratio

Remained relatively stable initially with a minor decreasing trend until mid-2020, then improved steadily from 1.50 to a peak of 1.85, indicating better inventory efficiency.

Average Inventory Processing Period

Increased gradually to a high of 244 days in mid-2020, reflecting slower inventory movement, followed by a notable decrease to under 200 days by late 2021, signifying faster inventory turnover.

Overall Trend

Both measures indicate a period of inventory management challenges culminating around mid-2020, followed by operational improvements leading to enhanced inventory turnover and shorter processing periods.

The receivables turnover ratio exhibits moderate variability over the observed periods, generally fluctuating between approximately 5.14 and 6.39. Initially, from March 31, 2017, to December 31, 2018, there is a gradual upward trend marked by an increase from 5.66 to 6.39, indicating an improvement in the efficiency of receivables collection. This is followed by a downturn around March 31, 2020, when the ratio declines to 5.14, possibly reflecting external challenges impacting collections. Subsequently, the ratio recovers to reach nearly 6.0 by the end of 2021, signaling a return to more effective management of receivables.

Correspondingly, the average receivable collection period, expressed in days, inversely mirrors the turnover ratio trends. Initially, collection periods decrease from 64 days to 57 days between March 31, 2017, and December 31, 2018, emphasizing improved cash collection speed. This efficiency diminishes notably by March 31, 2020, when the period peaks at 71 days, suggesting slower collections during this timeframe. In the following quarters, a gradual improvement occurs as the collection period reduces again, stabilizing around the low 60s by the end of 2021.

The inverse relationship between the receivables turnover ratio and the average collection period is consistent throughout the periods analyzed, confirming the expected dynamics between these two metrics. The temporal changes likely reflect operational adjustments or external market conditions influencing customer payment behavior and credit policies. Overall, while there are fluctuations, the metrics suggest a relatively stable receivables management process with some periods of stress and recovery.

The analysis of the quarterly financial data reveals several distinct trends across the average inventory processing period, the average receivable collection period, and the operating cycle over the observed timeframe.

Average Inventory Processing Period

The average inventory processing period shows a general upward trend from early 2017 through 2020, increasing from approximately 211 days in March 2018 to a peak of 244 days in both June and September 2020. This suggests a lengthening duration to convert inventory into sales during this period. However, starting in late 2020 and continuing into 2022, there is a noticeable decline in this period, reaching 197 days by September 2021 before slightly increasing to 206 days by March 2022. This recent decrease indicates improved efficiency in inventory processing or faster turnover.

Average Receivable Collection Period

The average receivable collection period exhibits fluctuations throughout the analyzed quarters. Initially, there is a slight downward trend from 64 days in March 2018 to lows around 57 days in September 2020, indicating improved collection efficiency. Nonetheless, the period experiences intermittent increases, notably rising to 71 days in March 2020, which may reflect delayed collections during that quarter. Subsequently, it stabilizes in the low 60-day range by 2021 and early 2022, suggesting a relatively steady collection cycle.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, follows an upward trend from 275 days in March 2018 to a maximum near 310 days in December 2020. This increasing cycle duration points to an elongation in the complete cash-to-cash cycle. Following this peak, the operating cycle shows a declining trend, decreasing to 261 days by September 2021 before a slight uptick to 269 days in March 2022. The reduction implies enhanced working capital management efficiency during the latter periods.

Overall, the data indicate that while the company experienced a period of lengthening working capital cycles from 2018 through 2020, improvements in both inventory turnover and receivables collection contributed to reduced cycle times starting in late 2020 and continuing into 2022. This improvement may reflect operational adjustments, changes in customer payment behaviors, or inventory management enhancements executed in response to earlier trends.

Payables Turnover Ratio

The payables turnover ratio exhibits a generally declining trend over the observed period. Initially, values were higher around 8.77 in early 2017 and gradually decreased to a low of approximately 5.44 by the end of the period in March 2022. There are minor fluctuations within this trend, including slight increases in mid-2019 and mid-2020, but the overall movement indicates a reduction in how frequently payables are turned over.

Average Payables Payment Period

The average payment period for payables shows an opposite and corresponding trend to the payables turnover ratio. Starting from approximately 42 days in early 2017, the payment period steadily increased over time, reaching about 67 days in late 2021. Some fluctuations are noted, with occasional declines mid-cycle, but the persistent upward movement suggests that on average, the company has taken longer to settle its payables.

Relationship Between Metrics

The inverse relationship between the payables turnover ratio and the average payment period is consistent throughout the period. As the average number of days to pay suppliers increased, the turnover ratio correspondingly decreased, indicating slower payment cycles. This could reflect strategic decisions for cash flow management or changes in supplier terms.

Summary and Insights

The observed trends suggest increasing payment terms or delayed payments to suppliers over the timeframe analyzed. This might indicate an effort to conserve cash or optimize working capital. However, prolonged payment periods might also pose risks related to supplier relationships or credit terms. The fluctuations within the trends imply some adjustment periods but do not substantially alter the overall pattern of increasing days payables outstanding and decreasing turnover ratio.

The analysis of the key operating cycle metrics over the examined periods reveals distinct trends in inventory management, receivables, payables, and the overall cash conversion cycle.

Average Inventory Processing Period

The inventory processing period shows a generally increasing trend from early 2018, starting around 211 days and reaching a peak near 244 days in mid-2020. Following this peak, there is a noticeable decline towards the end of 2021 and early 2022, reducing to approximately 197 days before a slight uptick to 206 days. This pattern suggests an initial lengthening in the time inventory remains before being processed, followed by improvements in inventory turnover efficiency in the later periods.

Average Receivable Collection Period

The receivable collection period demonstrates fluctuating behavior without a clear, sustained directional trend. It moves between approximately 57 and 71 days throughout the timeline. Peaks near 71 days in early 2020 indicate temporary elongations in collection times, with periods of improvement to around 57 days at other points. These fluctuations could reflect varying credit policies or customer payment behaviors.

Average Payables Payment Period

The payables payment period shows a gradual increase over time. From about 42 days in early 2018, it rises steadily to reach around 67 days by early 2022. This lengthening suggests that the company is taking longer to pay its suppliers, possibly reflecting strategic use of trade credit to improve liquidity or changes in vendor terms.

Cash Conversion Cycle

The cash conversion cycle follows a somewhat similar pattern to inventory processing time, initially increasing from approximately 233 days in early 2018 to just over 260 days around mid-2020. Subsequently, the cycle shortens significantly to near 194 days in late 2021 before a slight increase again. This indicates that after a period of extended time to convert investments in inventory and receivables back into cash, the company made improvements in its overall working capital management.

In summary, the firm experienced a period of lengthening inventory and cash conversion cycles up to mid-2020, which may have put pressure on liquidity. Following this, there is evidence of operational adjustments leading to shorter inventory processing and cash conversion times. The incrementation in payables payment period suggests increased reliance on trade credit over time. Receivables collection periods showed variability but remained relatively stable on average. These collective shifts denote a dynamic working capital environment with signs of management focus on optimizing operational cash flow in recent periods.