United Rentals Inc. (NYSE:URI)

The data reveals distinct trends in the efficiency of working capital components and their impact on the operating and cash conversion cycles over the analyzed periods.

Inventory turnover

This ratio shows a generally declining trend starting from a high of 52.17 in September 2020 to 28.65 by the end of 2022. This decrease indicates a slowdown in inventory movement, suggesting that inventory is held longer on average during recent periods compared to earlier ones.

Receivables turnover

Receivables turnover improved steadily from 5.21 in the first quarter of 2019, peaking at 7.35 in the third quarter of 2020, reflecting faster collection of receivables. However, there is a moderate decline afterward, stabilizing around 5.75 to 6.34 in 2022, indicating a slightly slower collection process compared to the peak.

Payables turnover

Payables turnover exhibits significant volatility. It ranged from a lower point around 5.35 in the last quarter of 2021 to a pronounced peak at 17.66 in September 2020. This variability suggests fluctuations in the speed of payments to suppliers, with periods of both rapid and delayed payments.

Working capital turnover

Data points for working capital turnover are sparse but show wide variances. Notably high values of 176.54 in the third quarter of 2022 and 75.65 in the first quarter of the same year indicate periods of very efficient use of working capital. However, gaps in data limit consistent assessment across all quarters.

Average inventory processing period

The average days inventory remains steady around 7 to 9 days until mid-2021, after which there is a clear upward trend reaching 13 days by the fourth quarter of 2022. This increase aligns with the drop in inventory turnover, confirming a slower inventory processing pace.

Average receivable collection period

This period decreased from 70 days in early 2019 to a low near 50 days in late 2020, indicating improved efficiency in collections. Starting in 2021, it gradually lengthened again to around 63 days by 2022, highlighting a moderate slowdown in collecting receivables.

Operating cycle

The operating cycle shortened from 78 days in early 2019 to below 60 days by late 2020, reflecting improved inventory and receivables management. However, it increased again above 70 days from 2021 onward, indicating a lengthening of the total time to complete the operating process.

Average payables payment period

This period fluctuated considerably, dropping sharply from 53-56 days in 2019 to as low as 21 days in late 2020, indicating quicker payments to suppliers. Post-2020, it lengthened markedly, reaching above 60 days in 2022, signifying slower payment trends in more recent quarters.

Cash conversion cycle

The cash conversion cycle improved significantly from a high of 39 days in early 2020 to a low of 6 days in mid-2021, showing enhanced efficiency in converting resources into cash. However, it exhibits some variability afterward, fluctuating between 10 and 22 days toward the end of 2022, but maintaining better performance relative to early period levels.

Overall, the trends indicate that although there were periods of marked improvement in managing receivables and the cash conversion cycle, recent quarters reflect a relaxation in these efficiencies. Meanwhile, inventory management has shown signs of slowing, with an increase in both processing days and a decrease in turnover ratios. Payables management displayed notable variability, suggesting changing supplier payment strategies over the examined timeframe. The data points to a dynamic working capital environment with fluctuating operational efficiencies across various components.

Cost of Revenues

The cost of revenues shows a generally increasing trend over the observed periods from March 31, 2018, to December 31, 2022. Starting at 1,088 million USD in early 2018, the cost steadily rises with some fluctuations, reaching its peak at 1,808 million USD by the end of 2022. During 2020, notably in the second quarter, there was a dip in the cost of revenues, which then resumed its upward trend through subsequent quarters. This pattern suggests an overall growth in business activity and associated costs over the five-year period, with a short-term impact possibly linked to external factors around mid-2020.

Inventory

Inventory levels also indicate an upward trajectory from 2018 through 2022. Beginning at 84 million USD in March 2018, there is a gradual increase with minor fluctuations until a notable rise occurs toward the end of 2021 and into 2022, where inventory climbs from around 164 million USD to a high of 232 million USD by December 2022. This increase in inventory levels might reflect an accumulation strategy or increased stock to support higher sales volume or anticipated demand.

Inventory Turnover Ratio

The inventory turnover ratio exhibits some volatility throughout the periods. Initially, values from 2018 are missing but become available from late 2018 onwards. The ratio remains high from late 2018 through early 2021, ranging mostly between the high 30s and low 50s, indicating relatively efficient inventory management during this phase. However, from mid-2021 onwards, the ratio declines steadily, reaching a low of 28.65 by the end of 2022. This downward trend suggests that the company is turning over its inventory less frequently, possibly due to slower sales relative to inventory or changes in inventory management practices. The decrease in turnover rate coincides with the rising inventory levels, reinforcing the observation of increased stock amidst slowing relative movement.

Overall Insights

The financial data indicates a pattern of growth in costs and inventory levels over the five-year period, with a peak in cost of revenues near the end of 2022 highlighting expanded operations or inflationary pressures. The decline in inventory turnover ratio in the later periods points to potential shifts in operational efficiency or market demand dynamics. The combined trends suggest that while sales and costs have grown, inventory management efficiency may be facing challenges or adjustments in response to market conditions.

Revenue Trends

Revenues exhibit a general upward trajectory over the observed period, increasing from $1,734 million in March 2018 to $3,296 million by December 2022. While quarterly fluctuations are present, there is a clear pattern of growth, particularly notable from mid-2020 onwards, where revenues rebound from a dip in early 2020 to reach new highs by the end of 2022.

Accounts Receivable Trends

The net accounts receivable balance follows an increasing trend, rising from $1,154 million in March 2018 to $2,004 million in December 2022. Periodic fluctuations are observed, but the overall direction is upward, reflecting potentially higher sales volumes or changes in credit terms.

Receivables Turnover Ratio Trends

The receivables turnover ratio shows modest variability over time. Beginning at 5.21 in December 2018, it peaks at 7.35 in June 2020, indicating faster collection of receivables during that period. Subsequently, the ratio trends downward somewhat, stabilizing around the 5.75 to 6.34 range in recent periods, suggesting a more consistent pace of collections relative to sales.

Insights

The concurrent increase in revenues and accounts receivable suggests expansion in business activity, but also implies growing amounts of capital tied up in receivables. The elevated turnover ratio in mid-2020 may reflect improved collection efficiency or changes in credit policies, possibly in response to external conditions at that time. The stabilization of turnover ratios thereafter indicates a normalization of payment patterns. Overall, the data indicates healthy growth in sales volume, accompanied by manageable shifts in receivables management efficiency.

Cost of Revenues

The cost of revenues exhibits an overall upward trend from March 2018 through December 2022. Starting at 1088 million USD in March 2018, the figure increases steadily, reaching 1808 million USD by December 2022. Notable fluctuations occur during 2020, with a dip in the middle of the year—likely influenced by external economic factors—before resuming growth in 2021 and continuing to rise through 2022. This persistent increase suggests either higher sales volumes, increased operational costs, or a combination of both over the observed period.

Accounts Payable

Accounts payable data shows significant variability across quarters. Initial values start around 513 million USD in March 2018, peaking at 1057 million USD in September 2021. There is a discernible cyclical pattern with values rising sharply in some quarters and then retracting. The volatility is notable between 2018 and 2022, with periods of both decline and steep increases. This pattern may indicate shifts in payment policies, supplier relationship management, or adjustments to working capital needs. The higher figures in 2021 and late 2022 suggest increased short-term liabilities or possibly extended payment terms.

Payables Turnover Ratio

The payables turnover ratio demonstrates considerable fluctuations over the periods available, with no consistent directional trend. Early data is missing, but from the first available ratio in the March 2019 quarter (8.74 times) up to December 2022 (5.83 times), the ratio declines overall. The ratio spikes sharply in March and June 2020 (above 11 times), followed by a declining trend through 2021 and 2022, reaching levels near 5.8 times. A decreasing payables turnover ratio typically implies slower payment to suppliers or an increase in accounts payable relative to cost of goods sold, aligning with the observed rise in accounts payable during later periods.

Summary of Relationships

The incremental increase in cost of revenues, coupled with an increasing accounts payable balance and a declining payables turnover ratio in recent years, suggests extended payment periods or greater reliance on credit from suppliers. The volatility in accounts payable indicates active management of short-term liabilities which may be affected by operational or external market pressures. The data reflects the company's evolving working capital dynamics with a tendency to manage payable obligations more cautiously or flexibly, especially post-2020.

The analysis of the quarterly financial data reveals several noteworthy trends in key financial metrics over the examined periods.

Working Capital

Working capital exhibited significant fluctuations, often swinging between negative and positive values. Initially, it started at -51 million US dollars in early 2018 and experienced pronounced declines reaching as low as -762 million by late 2019. Following this, beginning in the first quarter of 2020, the working capital shifted to positive territory with intermittent reversals. The values notably improved toward the end of the period, with particularly strong positive balances recorded in the last quarters of 2022, peaking at 278 million US dollars. This pattern suggests a volatile but improving liquidity position, indicating efforts towards enhancing short-term financial stability.

Revenues

Revenues demonstrated an overall growth trajectory across the timeframe, although some fluctuations were apparent. The revenue figures increased steadily from approximately 1.73 billion US dollars in the first quarter of 2018 to nearly 3.30 billion by the final quarter of 2022. Despite some short-term declines—such as observed dips around the start of 2020 and mid-2021—the general trend remained upward, reflecting expansion and increased operational scale or pricing power over time.

Working Capital Turnover Ratio

The working capital turnover ratio, reported only intermittently in selected quarters post-2019, indicated high variability. Values ranged broadly, with extremely elevated ratios such as 176.54 observed in the middle of 2022, suggesting efficient use of working capital relative to sales in those periods. However, the inconsistency and gaps in reporting limit comprehensive trend analysis. The elevated turnover levels imply that, during those quarters, the company was generating considerable sales volume relative to its working capital, which can be interpreted as strong operational performance or tight working capital management.

Inventory Turnover Trend

The inventory turnover ratio demonstrates notable fluctuations over the analyzed periods. Starting at 42.96 in the first quarter of 2019, the ratio generally increased, peaking at 52.17 in the third quarter of 2020. Subsequently, the ratio experienced a decline, with values decreasing to 31.41 by the third quarter of 2021. Following this drop, the ratio showed some variability but did not return to earlier peak levels, ending at 28.65 in the last quarter of 2022. This pattern indicates an initial improvement in turnover efficiency through 2020, followed by reduced turnover velocity in subsequent years.

Average Inventory Processing Period Trend

The average inventory processing period, measured in days, exhibits an inverse overall pattern compared to the inventory turnover ratio. It started at 8 days in the first quarter of 2019, remaining relatively stable around 8 to 9 days until the third quarter of 2020. A noticeable increase followed, reaching a peak of 12 days in the third quarter of 2021. After a slight decline to 10 days in the fourth quarter of 2021, the processing period fluctuated between 11 to 13 days through the end of 2022. This indicates a general lengthening of the time inventory remains on hand, especially after mid-2020.

Relationship Between Inventory Turnover and Processing Period

The inverse relationship between the inventory turnover ratio and the average inventory processing period is evident throughout the timeline. Periods with higher turnover ratios correspond to shorter processing times, signifying more rapid inventory movement. Conversely, as the turnover ratio decreased after mid-2020, the processing period lengthened, suggesting slower inventory turnover. This correlation highlights changing efficiency dynamics in inventory management over the observed quarters.

Implications

The data suggests that inventory management efficiency improved substantially until late 2020 but faced challenges afterward, potentially due to operational, market, or supply chain factors. The increased inventory processing period and reduced turnover ratios in recent periods may indicate higher inventory holding costs and less responsive inventory practices. Continuous monitoring and investigation into underlying causes are advisable to address these trends.

Receivables Turnover Ratio

The receivables turnover ratio exhibited a general upward trend from March 2019 through September 2020, increasing from 5.21 to a peak of 7.35. This indicates an improvement in the company's efficiency in collecting its receivables during that period. However, following the peak, the ratio declined to 6.58 by December 2020 and fluctuated moderately thereafter. From March 2021 to December 2022, the ratio ranged between approximately 5.75 and 6.75, showing some variability but no clear sustained trend upward or downward.

Average Receivable Collection Period (Days)

The average receivable collection period declined steadily from 70 days in March 2019 to a low of 50 days in September 2020, reflecting faster collection of receivables in that interval. After this improvement, the collection period increased again, reaching 63 days in December 2021. Subsequently, the collection period fluctuated slightly but remained near the 60-day mark through the end of 2022, indicating relative stabilization.

Overall Insights

The inverse relationship between the receivables turnover ratio and the average collection period is evident, consistent with financial theory. The period from early 2019 to late 2020 saw significant improvement in working capital management with faster receivable collection demonstrated by a rising turnover and decreasing collection days. Post-2020, collection efficiency decreased somewhat and then stabilized, suggesting the company maintained a relatively steady receivables collection process during this recent period. The fluctuations in the last two years may reflect changing market conditions or credit policies but did not lead to sustained deterioration or improvement.

The analysis of the quarterly financial data reveals distinct trends in the company's working capital management over the observed periods.

Average Inventory Processing Period

The average inventory processing period was steady at around 8 to 9 days from March 2019 to June 2020, indicating a consistent turnover rate. There was a notable increase starting in the second quarter of 2021, reaching a peak of 12 days in September 2021 and fluctuating between 10 and 13 days thereafter. This upward trend suggests a lengthening time to process inventory, which may indicate slower inventory movement or changes in inventory management strategies.

Average Receivable Collection Period

This metric showed a declining trend from 70 days in March 2019 to a low of 50 days in September 2020, reflecting improved efficiency in collecting receivables. However, from September 2020 onwards, the period oscillated between 54 and 63 days, indicating moderate variability and a slight relaxation in collection speed. The increase in receivable days towards the end of the period may suggest challenges in collections or extended credit terms.

Operating Cycle

The operating cycle, representing the total time from inventory purchase to cash collection, decreased notably from 78 days in March 2019 to 57 days in September 2020, illustrating enhanced operational efficiency. Post this period, the cycle lengthened again, reaching up to 76 days by December 2022. This increase is primarily influenced by the extension in inventory processing and receivable collection periods, indicating an overall slower conversion of resources into cash.

In summary, the company experienced an improvement in working capital turnover efficiency through mid-2020, followed by a reversal of this trend with longer inventory and receivables cycles in the subsequent years. This shift may warrant closer attention to inventory management and credit policies to sustain operational liquidity.

The payables turnover ratio and the average payables payment period display notable fluctuations over the observed time span. The payables turnover ratio exhibits a declining trend beginning in early 2019, dropping from 8.74 to a low of 5.35 by the end of 2021. This decline indicates a slower rate of payables turnover, suggesting that the company may be taking longer to pay its suppliers over this period. There are some short-term recoveries within this trend, such as the peak in the third quarter of 2020 (17.66), before subsequent decreases.

Simultaneously, the average payables payment period, which is inversely related to the payables turnover ratio, shows an increasing widening pattern over the same period. Starting at around 42 days in March 2019, the payment period lengthens steadily, reaching its highest point of 68 days near the end of 2021. This trend reinforces the observation that the company is extending the time taken to settle its payables.

From 2022 onwards, the payables turnover ratio stabilizes somewhat in the range of approximately 5.7 to 7.3. Correspondingly, the average payment period remains elevated around 60 days, indicating that the company has maintained a longer payables payment cycle relative to earlier years.

Payables Turnover Ratio

Displayed an overall decreasing trend from 2019 through 2021 with intermittent spikes. The ratio fell from values close to 9 down to near 5 by late 2021, indicating slower payables turnover.

Average Payables Payment Period

Increased gradually from about 40 days in early 2019 to 68 days near the end of 2021, confirming a lengthening of the payment period to suppliers.

Trend from 2022

The metrics plateau at a lower turnover ratio and higher payment period levels compared to the earlier period, suggesting a persistent change in payment practices.

The analysis of the quarterly financial data reveals several noteworthy patterns and trends regarding inventory management, receivables, payables, and cash conversion cycles over the reported periods.

Average Inventory Processing Period

This metric demonstrates a relatively stable duration, generally fluctuating between 7 and 13 days. Beginning with a period around 8-9 days in early 2018, it remained consistent through 2019, mostly at 7 to 9 days. In 2021 and 2022, a slight increase is observed, with values rising to around 10-13 days, indicating a minor elongation in inventory processing times toward the later periods.

Average Receivable Collection Period

The receivable collection period shows a gradual decline from approximately 70 days in early 2018 down to the low 50s by mid-2020, suggesting improved efficiency in collecting receivables. However, from late 2020 through 2022, fluctuations occur, with values oscillating between 54 and 63 days. This indicates some variability but generally stable collection durations in the medium term.

Average Payables Payment Period

The payables payment period presents more volatility across the quarters. Starting in the low 40s in early 2018, there are significant variations, most notably a peak at 56 days in late 2018, followed by a decline to as low as 21 days in late 2020. The period then rises again substantially, reaching up to 68 days in late 2021. The latter stages of the dataset show payment periods consistently above 50 days, indicating a strategic lengthening in the time taken to pay suppliers during 2021 and 2022.

Cash Conversion Cycle

The cash conversion cycle (CCC) reflects the aggregate impact of inventory, receivables, and payables efficiency. Initial data from 2018 reveals a declining trend, moving from 36 days to a low of 16 days by the end of that year, indicating improved working capital management. However, the cycle lengthened again in 2020, peaking around 39 days early in the year before decreasing steadily through 2021. By late 2021 and into 2022, the CCC stabilized at low values between 6 and 13 days, pointing to effective working capital management and shorter operational cycles compared to earlier periods.

Overall, the data suggests that the company has experienced improvements in receivables collection and inventory processing efficiency over the analyzed timeframe. The lengthening payables payment period post-2020 may reflect deliberate extension of supplier payment terms to optimize cash flow. These factors together contribute to a reduced cash conversion cycle in recent periods, indicating more efficient management of working capital and enhanced liquidity.