Thermo Fisher Scientific Inc. (NYSE:TMO)

Inventory Turnover

The inventory turnover ratio demonstrates an overall upward trajectory from 4.02 in 2020 to 5.06 in 2024, indicating improved efficiency in managing and selling inventory over the period. Notably, the ratio increased steadily after a slight dip in 2021.

Receivables Turnover

The receivables turnover ratio fluctuated over the years, starting at 5.61 in 2020, decreasing to 4.92 in 2021, then recovering to 5.53 in 2022, before slightly declining and stabilizing around 5.21 to 5.23 in 2023 and 2024. This suggests some variability in the efficiency of collecting receivables, with a modest decline in 2023 and 2024.

Payables Turnover

The payables turnover ratio experienced growth over the period, increasing from 7.45 in 2020 to a peak of 8.97 in 2023, followed by a slight decline to 8.18 in 2024. This pattern indicates a generally faster payment to suppliers, with a minor reversal in the final year.

Working Capital Turnover

Working capital turnover showed significant variability. It nearly doubled from 2.76 in 2020 to 5.87 in 2021, then decreased to 5.46 in 2022 and further dropped to 4.05 in 2023, before recovering to 4.87 in 2024. The initial sharp increase suggests improved utilization of working capital, but the subsequent decline points to less efficient use during 2022-2023 with partial recovery thereafter.

Average Inventory Processing Period

The average inventory processing period steadily decreased from 91 days in 2020 to 72 days in 2023, remaining level in 2024. This trend aligns with the improved inventory turnover, reflecting faster inventory movement.

Average Receivable Collection Period

The average receivable collection period showed an increase from 65 days in 2020 to 74 days in 2021, then reverted to 66 days in 2022, and stabilized around 70 days in 2023 and 2024. This indicates some variability in collection timing but generally a slight lengthening compared to 2020.

Operating Cycle

The operating cycle in days fluctuated but shows a general decline from 156 days in 2020 to 142 days by 2023 and 2024. This shortening suggests an improvement in the overall process of converting inventory and receivables into cash.

Average Payables Payment Period

The average payables payment period decreased from 49 days in 2020 to a low of 41 days in 2023 before increasing slightly to 45 days in 2024. This pattern indicates faster payments in 2023, followed by a modest extension of payment terms in 2024.

Cash Conversion Cycle

The cash conversion cycle varied over the five years, peaking at 115 days in 2021, then decreasing to 97 days in 2022, rising slightly to 101 days in 2023, and returning to 97 days in 2024. Overall, the trend points toward efficiency gains in converting investments into cash, despite minor fluctuations.

The financial data reveals several notable trends and patterns over the five-year period ending on December 31, 2024, particularly concerning cost of revenues, inventories, and inventory turnover ratio.

Cost of Revenues

The cost of revenues shows a general upward trend from 2020 through 2022, increasing from approximately 16.2 billion US dollars to nearly 25.9 billion US dollars. This reflects a significant rise in costs over these three years. However, starting in 2023, the cost of revenues slightly decreases to around 25.8 billion US dollars and continues to decline modestly to approximately 25.2 billion US dollars by the end of 2024. This shift indicates a stabilization or potential improvement in cost management after a period of rapid increase.

Inventories

Inventories increased steadily from 2020, rising from about 4.0 billion US dollars to a peak of approximately 5.6 billion US dollars in 2022. After this peak, inventories started to decline, falling to just under 5.1 billion US dollars in 2023 and further to roughly 5.0 billion US dollars by the end of 2024. This pattern suggests a cautious approach to inventory holdings possibly aimed at optimizing working capital after reaching higher inventory levels in 2022.

Inventory Turnover Ratio

The inventory turnover ratio initially declined slightly from 4.02 in 2020 to 3.88 in 2021, indicating slower movement of inventory during this period. Subsequently, there was a marked improvement with the ratio increasing to 4.6 in 2022 and further improving to 5.06 by 2023. The ratio remained stable at 5.06 in 2024. This rising turnover ratio demonstrates enhanced efficiency in inventory management, with the company able to sell and replace inventory more frequently year over year since 2021.

Overall, the data indicates an initial phase of increasing costs and inventory buildup up to 2022, followed by efforts to control costs and reduce inventory levels. The consistent improvement in inventory turnover ratio from 2021 onwards reflects a stronger operational efficiency in managing inventory relative to sales. These trends suggest strategic adjustments aimed at optimizing costs and asset utilization in recent years.

Revenues

The revenue figures demonstrate a generally upward trend from 2020 through 2024. Starting at $32,218 million in 2020, revenues increased significantly to $39,211 million in 2021 and continued to rise to $44,915 million in 2022. However, there was a slight decline in 2023 to $42,857 million, followed by a marginal increase to $42,879 million in 2024. Overall, revenues exhibited growth with a minor fluctuation in the latter years of the period analyzed.

Accounts Receivable (less allowances)

Accounts receivable, net of allowances, showed a consistent increase throughout the five-year span. The balance rose from $5,741 million in 2020 to $7,977 million in 2021 and then marginally increased in subsequent years to reach $8,191 million by the end of 2024. This upward trend suggests an accumulation of receivables relative to revenues, particularly notable between 2020 and 2021, with a more stabilized growth afterward.

Receivables Turnover

The receivables turnover ratio experienced some fluctuations over the examined periods. It declined from 5.61 in 2020 to 4.92 in 2021, indicating slower collection of receivables. After this low, the ratio improved to 5.53 in 2022, suggesting enhanced efficiency in collecting receivables. In the two most recent years, the ratio slightly decreased again to 5.21 in 2023 and then stabilized at 5.23 in 2024. These variations indicate some inconsistency in the pace of collections, though the turnover remains relatively stable around a ratio slightly above 5 in the latest periods.

Cost of Revenues

The cost of revenues experienced a steady increase from 2020 through 2022, rising from $16,214 million in 2020 to a peak of $25,944 million in 2022. After this peak, there was a slight decline over the following two years, reaching $25,177 million in 2024. This suggests initial growth in operational costs related to the products or services sold, followed by a minor reduction or stabilization in those costs in the latter years.

Accounts Payable

Accounts payable increased consistently between 2020 and 2022, moving from $2,175 million to $3,381 million, indicating a growing amount owed to suppliers and vendors. However, in 2023, there was a noticeable decrease to $2,872 million, followed by a partial recovery to $3,079 million in 2024. This pattern may reflect changes in payment policies, supplier negotiations, or variations in purchase volumes.

Payables Turnover Ratio

The payables turnover ratio displayed variability over the period. It decreased from 7.45 in 2020 to 6.83 in 2021, suggesting slower payments to suppliers. Subsequently, the ratio increased to 7.67 in 2022 and further to 8.97 in 2023, representing faster payment cycles. There was a decline again in 2024 to 8.18, although the ratio remained higher than in the initial years. This fluctuation indicates changing efficiency or strategic decisions in managing payables.

Overall Insights

The data reveals a general increase in cost of revenues and accounts payable through 2022, pointing to business growth or increased operational scale. The subsequent slight declines or stabilization in these figures, combined with the fluctuating payables turnover ratio, suggest adjustments in working capital management and supplier payment strategies. The elevated payables turnover ratio in the last two years indicates an emphasis on faster payment cycles compared to earlier periods.

The analysis of the presented financial data reveals several noteworthy trends related to working capital, revenues, and working capital turnover ratios over the five-year period.

Working Capital

Working capital demonstrates a fluctuating pattern over the years. It initially declines sharply from 11,653 million US dollars in 2020 to 6,677 million in 2021. This decrease suggests a possible tightening in current assets relative to current liabilities during that period. Subsequently, working capital recovers to 8,219 million in 2022 and continues to grow to 10,577 million in 2023, indicating an improvement in liquidity and short-term financial health. However, in 2024, working capital decreases again to 8,805 million, implying some variability in maintaining liquidity levels.

Revenues

Revenues show overall growth from 32,218 million US dollars in 2020 to 44,915 million in 2022. The upward trend reflects positive sales performance and potential market expansion. Yet, revenues dip slightly to 42,857 million in 2023 and then remain relatively stable at 42,879 million in 2024. The plateauing revenue figures in the last two years suggest market saturation or challenges in sustaining previous growth momentum.

Working Capital Turnover Ratio

The working capital turnover ratio experiences significant variation across the observed years. Starting at 2.76 in 2020, the ratio more than doubles to 5.87 in 2021. This sharp increase could be linked to the reduced working capital coupled with increasing revenues, implying a more efficient use of working capital to generate sales during that year. The ratio slightly decreases to 5.46 in 2022, followed by a more substantial decline to 4.05 in 2023, indicating a reduction in efficiency or changes in operational factors. The ratio recovers somewhat to 4.87 in 2024, denoting moderate improvement.

Overall, the data points to a dynamic operational environment with fluctuations in liquidity and efficiency measures. While revenues grew significantly in the initial years, growth seems to have plateaued more recently. Working capital levels have varied, perhaps reflecting changes in the company's management of current assets and liabilities. The working capital turnover ratio changes substantially, indicating variability in the company's efficiency to convert working capital into revenues. These trends highlight areas for potential focus regarding liquidity management and sustaining revenue growth.

Inventory Turnover

Over the analyzed period, the inventory turnover ratio demonstrates an overall upward trend. Beginning at 4.02 in 2020, the ratio experienced a slight decline to 3.88 in 2021, indicating a small reduction in how quickly inventory was sold and replenished during that year. However, from 2021 onwards, there is a consistent increase, reaching 4.6 in 2022 and further improving to 5.06 in both 2023 and 2024. This upward movement suggests enhanced efficiency in managing and selling inventory in recent years, reflecting more effective inventory utilization.

Average Inventory Processing Period

The average inventory processing period, expressed as a number of days, generally moves inversely to the inventory turnover ratio, showcasing a reduction over the observed years. Starting at 91 days in 2020, the processing period slightly increased to 94 days in 2021, mirroring the dip in inventory turnover that same year. Subsequently, a significant decrease occurred, dropping to 79 days in 2022 and further to 72 days in 2023, where it stabilized in 2024. This decline indicates a faster inventory turnover cycle and potentially improved operational efficiency in managing inventory levels.

Overall Insights

The data reveals that after a brief setback in 2021, the company has strengthened its inventory management processes, as shown by the rise in inventory turnover and the concurrent reduction in days required to process inventory. These trends point toward a more efficient use of stock and possibly better alignment between inventory levels and market demand. The stability of these improvements in the last two recorded years suggests that these enhancements are sustainable.

Receivables Turnover

The receivables turnover ratio exhibits some fluctuations over the observed periods. Starting at 5.61 in 2020, it declined to 4.92 in 2021, indicating a slower collection pace during that year. Following this decline, the ratio recovered somewhat, increasing to 5.53 in 2022. However, in the subsequent years, 2023 and 2024, the ratio decreased slightly to 5.21 and then stabilized at 5.23, suggesting a modest reduction in the efficiency of converting receivables into cash compared to the peak in 2022.

Average Receivable Collection Period

The average receivable collection period, expressed in days, mirrors the inverse movement of the receivables turnover ratio, as expected. The collection period increased from 65 days in 2020 to 74 days in 2021, indicating customers took longer to pay their invoices. It improved significantly in 2022, reducing to 66 days, closely aligning with the ratio improvement. In 2023 and 2024, the collection period slightly increased again to 70 days and remained constant, highlighting some variability but overall indicating that the company experienced some challenges in maintaining a consistently short collection period in recent years.

Summary of Trends

Overall, the data shows volatility in the company’s ability to collect receivables efficiently. The turnover ratio and the corresponding collection period worsened in 2021 but showed improvement in 2022. However, starting from 2023, the collections efficiency slightly declined or stabilized at a lower level compared to the earlier peak, implying the company may need to review its receivables management to enhance cash flow consistency.

Inventory Processing Period

The average inventory processing period exhibited a decreasing trend over the analyzed years, declining from 91 days in 2020 to 72 days by 2023 and remaining steady into 2024. This suggests an improvement in inventory management efficiency, with the company reducing the time inventory is held before processing.

Receivable Collection Period

The average receivable collection period showed variability, increasing from 65 days in 2020 to 74 days in 2021, then decreasing to 66 days in 2022. However, it rose again to 70 days in both 2023 and 2024, indicating fluctuations in the speed of collecting receivables but overall maintaining a collection period somewhat longer than the initial year.

Operating Cycle

The operating cycle followed a general downward trend, dropping from 156 days in 2020 to 142 days in 2023 and stabilizing at that level in 2024. This decrease reflects the combined effects of improved inventory processing and relatively stable receivables collection, resulting in a shorter overall cycle for converting resources into cash.

Payables Turnover

The payables turnover ratio exhibits fluctuations over the five-year period. It decreased from 7.45 in 2020 to 6.83 in 2021, indicating a slower rate of paying suppliers during that year. Subsequently, the ratio increased to 7.67 in 2022, followed by a more pronounced rise to 8.97 in 2023, suggesting a significant improvement in the efficiency of payments to suppliers. In 2024, the ratio slightly declined to 8.18 but remained above the earlier years' levels, reflecting generally improved payment practices compared to the beginning of the period.

Average Payables Payment Period

The average payables payment period, measured in days, shows an inverse pattern relative to the payables turnover. It lengthened from 49 days in 2020 to 53 days in 2021, indicating slower payments during the same period when the turnover ratio decreased. It then shortened considerably to 48 days in 2022 and further declined to 41 days in 2023, highlighting a trend toward quicker settlements with suppliers. In 2024, there was a moderate increase to 45 days, but the payment period remained shorter than in the initial years, consistent with the higher payables turnover ratio indicated previously.

Summary of Trends

Overall, the data suggests that the company improved its payment efficiency from 2021 through 2023, as evidenced by rising payables turnover and declining average payment periods. The slight reversal observed in 2024—with a marginal decrease in payables turnover and an increase in payment days—may indicate a minor relaxation in payment discipline or changes in supplier terms. Nonetheless, payment performance in 2024 remains better than at the start of the period examined. These trends reflect the company's evolving management of payables, balancing cash flow considerations with supplier relationships.

Average Inventory Processing Period

The average inventory processing period has exhibited a generally declining trend over the analyzed years, decreasing from 91 days in 2020 to 72 days in both 2023 and 2024. This indicates improved efficiency in inventory management, with the company reducing the time inventory remains before being sold or used.

Average Receivable Collection Period

The average receivable collection period shows some variability, increasing from 65 days in 2020 to a peak of 74 days in 2021, followed by a decline to 66 days in 2022, and then a slight increase to 70 days in 2023 and 2024. This suggests fluctuations in the company's effectiveness in collecting receivables, with a tendency to take longer to collect in recent years compared to 2020.

Average Payables Payment Period

The average payables payment period has generally decreased from 49 days in 2020 to 41 days in 2023, before rising again to 45 days in 2024. This trend indicates the company initially shortened the duration it takes to pay suppliers, potentially to maintain strong supplier relationships, followed by a slight lengthening in the most recent year.

Cash Conversion Cycle

The cash conversion cycle (CCC) declined from 107 days in 2020 to 97 days in 2022, showing enhanced working capital efficiency by reducing the time between cash outflows and inflows. However, the CCC increased again to 101 days in 2023 before reversing to 97 days in 2024. Overall, this reflects a moderate improvement over the period, though the non-linear trend suggests some operational or market fluctuations affecting working capital management.