e.l.f. Beauty, Inc. (NYSE:ELF)

The analysis of the financial metrics over the five-year period reveals several notable trends concerning the company's operational efficiency and liquidity management.

Inventory Turnover

The inventory turnover ratio exhibits a fluctuating pattern, starting at 2.2 in 2020, declining to its lowest point of 1.57 in 2024 after peaking at 2.32 in 2023. This suggests challenges in managing inventory efficiently, with slower inventory movement especially pronounced in the most recent year.

Receivables Turnover

The receivables turnover ratio decreased from 9.52 in 2020 to a low of 7.92 in 2021, followed by a slight recovery and stabilization around 8.3 in the subsequent years. This indicates a moderate decline in the speed of collecting receivables, with collection periods expanding marginally.

Payables Turnover

A continuous decline is apparent in payables turnover, from 8.21 in 2020 down sharply to 3.7 in 2024. This indicates the company is taking longer to pay its suppliers, which is corroborated by the increase in the average payables payment period.

Working Capital Turnover

Working capital turnover smoothly decreased from 3.48 in 2020 to 2.96 in 2023, indicating a reduced efficiency in utilizing working capital. However, in 2024 there is a significant increase to 5.75, which suggests an improvement in the use of working capital or other operational changes impacting this metric.

Average Inventory Processing Period

The average inventory processing period increased from 166 days in 2020, peaked at 233 days in 2024, with a temporary decline in 2023. This implies that inventory is held for longer durations before being sold, which may tie up capital.

Average Receivable Collection Period

The average receivable collection period lengthened from 38 days in 2020 to 44 days in 2024, reflecting a slower collection process and potential impacts on cash inflows.

Operating Cycle

The operating cycle follows a similar trend to inventory and receivables periods, increasing from 204 days in 2020 to a high of 277 days in 2024, after a dip in 2023. This indicates that the overall time taken to turn inventory into cash has extended.

Average Payables Payment Period

This period extended significantly from 44 days in 2020 to 99 days in 2024, showing that the company is delaying payments to its suppliers more, which could be used as a means to manage cash flow but may affect supplier relationships.

Cash Conversion Cycle

The cash conversion cycle fluctuates, increasing from 160 days in 2020 to 212 days in 2022, then dropping to 140 days in 2023 before rising again to 178 days in 2024. Despite some improvement in 2023, the cycle remains longer than in 2020, which indicates that the company's cash is tied up longer in the operating process.

Overall, the data suggests that the company has experienced increasing challenges in managing inventory and receivables efficiently over the analyzed period. The prolonged inventory holding times and slower collections have contributed to an extended operating cycle. The significantly lengthening payables payment period indicates strategic management of cash outflows, potentially to alleviate liquidity pressures. Variations in working capital turnover and cash conversion cycle imply fluctuations in operational efficiency and cash management that warrant continued monitoring.

The financial data reveals notable trends in the cost of sales, inventory levels, and inventory turnover over the five-year period.

Cost of Sales

The cost of sales has shown a consistent and substantial increase throughout the period, rising from approximately US$101.7 million in 2020 to nearly US$299.8 million by 2024. This represents almost a threefold increase over five years, indicating significant growth in the volume of goods sold or an increase in production costs.

Inventory, Net

Inventory levels also rose sharply, increasing from US$46.2 million in 2020 to US$191.5 million in 2024. The increase was steady year over year, with a particularly large jump between 2023 and 2024. This pattern suggests accumulation of stock, which could be due to higher purchasing to meet expected demand or slower inventory turnover.

Inventory Turnover

The inventory turnover ratio illustrates variability rather than a consistent trend. It started at 2.2 times in 2020, declined to a low of 1.57 times by 2024, after peaking slightly at 2.32 in 2023. The overall decrease from 2.2 to 1.57 implies that the company is selling and replenishing inventory less frequently, which may suggest challenges in inventory management or changes in sales velocity relative to inventory held.

In summary, while the company has experienced growth in sales and inventory holdings, the decline in inventory turnover ratio signals potential inefficiencies in inventory management or shifts in demand. Monitoring this metric closely alongside sales patterns is recommended to optimize inventory levels and operational performance.

The financial data displays a clear growth trajectory across the reported periods, particularly in net sales, accounts receivable, and receivables turnover. Detailed observations are as follows:

Net Sales

There is a consistent and significant increase in net sales over the five-year period. Starting at $282.9 million in 2020, net sales rose moderately to $318.1 million in 2021 and $392.2 million in 2022. A notable acceleration occurred in 2023 with sales reaching $578.8 million, followed by a substantial jump to over $1 billion ($1,023.9 million) in 2024. This pattern suggests strong revenue growth, particularly in the last two years, indicating either expanded market share, product demand, or successful sales strategies.

Accounts Receivable, Net

Accounts receivable also increased steadily from $29.7 million in 2020 to $123.8 million in 2024. The growth mirrors the sales increase, reflecting a higher amount of sales made on credit. The jump between 2022 ($45.6 million) and 2024 ($123.8 million) is especially marked, aligning with the surge in net sales. This could suggest either extended credit terms or increased sales volume on credit.

Receivables Turnover Ratio

The receivables turnover ratio shows a declining trend from 9.52 in 2020 to 8.27 in 2024. This indicates that while total receivables are growing, the company is collecting its receivables slightly more slowly over time. The ratio decreased sharply from 9.52 to 7.92 between 2020 and 2021, then experienced minor fluctuations but remained below 9 for the remainder of the period. This trend warrants monitoring as a decreasing turnover ratio can imply credit risk or inefficiencies in collection processes.

In summary, the data reveal robust growth in sales accompanied by a proportional increase in accounts receivable. However, the decline in receivables turnover ratio suggests the company may be taking longer to collect payments from customers over time. Monitoring accounts receivable aging and collection efforts may be advisable to maintain healthy cash flows amid rapid growth.

Cost of Sales

The cost of sales shows a consistent upward trend over the analyzed periods. Starting at approximately 101.7 million in March 2020, it increased to nearly 300 million by March 2024. This represents a nearly threefold increase over four years, indicating significant growth in production or procurement costs that could be tied to expansion, increased sales volume, or rising input prices.

Accounts Payable

Accounts payable also increased substantially from about 12.4 million in March 2020 to over 81 million in March 2024. The increase is particularly sharp between 2023 and 2024, suggesting either lengthened payment terms or a higher level of credit purchases. This growth in liabilities aligns with the rising cost of sales, reflecting higher obligations to suppliers or vendors.

Payables Turnover Ratio

The payables turnover ratio shows a declining trend, moving from 8.21 times in 2020 down to 3.7 times in 2024. A decreasing turnover ratio indicates that the company is taking longer to pay its suppliers. This trend is consistent with the growing absolute accounts payable and may point to a strategic decision to conserve cash or reflect exhibiting liquidity management challenges.

The financial data indicates several notable trends over the five-year period ending March 31, 2024.

Working Capital

The working capital demonstrated consistent growth from 81,237 thousand USD in 2020 to a peak of 195,349 thousand USD in 2023, followed by a slight decline to 177,962 thousand USD in 2024. This suggests a generally expanding operational liquidity with a minor contraction in the most recent year.

Net Sales

Net sales exhibited a strong upward trajectory throughout the period, more than tripling from 282,851 thousand USD in 2020 to over 1,023,932 thousand USD by 2024. This sharp increase indicates accelerated revenue growth, especially notable in the last two years where sales jumped significantly.

Working Capital Turnover

The working capital turnover ratio showed a declining trend from 3.48 in 2020 to 2.96 in 2023, reflecting slower sales generation relative to the investment in working capital during this interval. However, in 2024 there was a marked increase to 5.75, indicating a substantial improvement in efficiency with respect to the use of working capital to generate sales.

Overall, the data reveals strong sales expansion accompanied initially by increasing working capital investment, which caused a reduction in turnover ratio. The latest year's data suggest a strategic shift or operational improvement leading to higher sales efficiency relative to working capital, possibly indicating better management of resources or increased sales productivity.

Inventory Turnover

The inventory turnover ratio exhibited fluctuations over the analyzed period. It started at 2.2 in March 2020 and decreased steadily to 1.66 by March 2022, indicating a slowdown in inventory movement. This trend reversed in the following year, reaching 2.32 in March 2023, signifying an improvement in the efficiency of inventory management. However, by March 2024, the ratio declined again to 1.57, the lowest point in the five-year span, suggesting a potential increase in inventory holding or slower sales momentum during that year.

Average Inventory Processing Period

This metric, expressing the average number of days inventory is held before sale, moved inversely to the inventory turnover ratio. Beginning at 166 days in March 2020, it rose consistently to 220 days by March 2022, reflecting longer holding periods and possibly reduced sales velocity. The following year, March 2023, showed a substantial decrease to 158 days, indicating accelerated inventory processing and improved turnover. Nevertheless, by March 2024, the average processing period extended significantly to 233 days, the longest period recorded, implying slower inventory movement and potential challenges in sales or inventory management.

Overall Trends and Insights

The analyzed data reveal a general pattern of inventory management challenges with notable variability. The initial decline in inventory turnover and increase in processing days suggest either demand fluctuations or operational inefficiencies up to 2022. The subsequent improvement in 2023 points to effective corrective actions or market conditions favoring faster inventory movement. The reversal in 2024, with the lowest turnover ratio and longest processing period, may signal emerging issues such as excess stock, reduced consumer demand, or supply chain constraints. Continuous monitoring and strategic adjustments are advised to optimize inventory levels and enhance turnover efficiency.

Receivables Turnover

The receivables turnover ratio shows a declining trend from 9.52 in 2020 to 7.92 in 2021, indicating a slower rate of collections. Although there is a slight recovery to 8.61 in 2022, the ratio gradually decreases again over the subsequent years to 8.27 in 2024. This overall decline suggests that the company is collecting its receivables less frequently over time.

Average Receivable Collection Period

The average collection period has increased from 38 days in 2020 to 46 days in 2021, reflecting a longer time for the company to collect receivables. This metric slightly improves to 42 days in 2022 but then increases again, reaching 44 days by 2024. The fluctuation corresponds inversely with the receivables turnover ratio and confirms an elongation in the days required to collect outstanding receivables.

Overall Analysis

The data indicates a gradual decline in the efficiency of receivables management over the five-year period. The company experiences a lengthening in the collection cycle, which may impact liquidity and cash flow. Despite minor recoveries, the overall trend points to challenges in accelerating receivables turnover.

The analysis of the financial data reveals notable fluctuations in key operational efficiency metrics over the five-year period.

Average Inventory Processing Period

The average inventory processing period exhibited variability with an overall increasing trend. It started at 166 days in 2020, peaked at 220 days in 2022, dipped to 158 days in 2023, and then rose sharply to 233 days in 2024. This indicates that the company experienced increasing durations in inventory processing, particularly in the most recent year, suggesting potential challenges in inventory turnover or supply chain management.

Average Receivable Collection Period

The average receivable collection period showed a gradual increase over the years, beginning at 38 days in 2020 and increasing to 44 days by 2024. The incremental rise suggests a slight lengthening in the time taken to collect receivables, which may imply a modest decline in credit management effectiveness or changes in customer payment behavior.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, demonstrated a pattern consistent with the changes in its components. It increased from 204 days in 2020 to 262 days in 2022, decreased significantly to 201 days in 2023, and then surged to 277 days in 2024. The overall lengthening of the operating cycle indicates a prolonged time frame for the company to convert inventory into cash, potentially impacting liquidity and operational efficiency.

In summary, the company faced increasing operational durations within the last analyzed year, with the inventory processing period and operating cycle reaching their highest points, while the receivable collection period showed a steady upward trend. These patterns highlight areas that may warrant closer management attention to optimize working capital and improve cash flow dynamics.

The analysis of payables metrics over the five-year period reveals distinct trends indicative of changes in payment practices and possibly supplier relationship management.

Payables Turnover

The payables turnover ratio declines consistently from 8.21 in 2020 to 3.7 in 2024. This downward trend suggests the company is paying its suppliers more slowly relative to purchases, as a lower turnover ratio means fewer cycles of paying off accounts payables within the year.

Average Payables Payment Period

Correspondingly, the average payables payment period shows a rising trajectory, extending from 44 days in 2020 to 99 days in 2024. This increase indicates a lengthening in the average duration the company takes to settle its payables, nearly doubling over the period under review.

Overall, these metrics together suggest a strategic or operational shift towards slower payment to suppliers. This might reflect efforts to improve working capital management by retaining cash longer, or it could signify challenges in meeting short-term liabilities promptly. The steep increase in days payable outstanding in the last reported year is particularly notable and may warrant further investigation for liquidity risk or supplier negotiation impacts.

Average Inventory Processing Period

The average inventory processing period exhibits fluctuations over the analyzed years. It increased from 166 days in 2020 to a peak of 220 days in 2022, indicating a slower turnover of inventory during this period. This was followed by a reduction to 158 days in 2023, suggesting improved inventory management or sales velocity, before rising again to 233 days in 2024. The final increase points towards a possible accumulation of inventory or challenges in moving products efficiently.

Average Receivable Collection Period

The receivable collection period remained relatively stable throughout the five years. Starting at 38 days in 2020, it increased slightly to 46 days in 2021, then decreased to 42 days in 2022. The period remained fairly steady thereafter, with minor increments to 43 days in 2023 and 44 days in 2024. This consistency indicates steady credit policies and consistent customer payment behavior.

Average Payables Payment Period

The payables payment period shows a clear upward trend from 44 days in 2020 to 99 days in 2024. The increase was gradual through 2021 and 2022, with values of 51 and 50 days, respectively. In 2023, it grew more substantially to 61 days and then surged sharply to 99 days in 2024. This suggests an increasing extension of the time taken to settle payables, possibly reflecting improved negotiation of payment terms with suppliers or cash flow management strategies.

Cash Conversion Cycle

The cash conversion cycle generally follows the patterns of the inventory, receivables, and payables periods. It rose from 160 days in 2020 to a peak of 212 days in 2022, primarily driven by the lengthening inventory processing period. The cycle improved significantly in 2023 to 140 days, reflecting better overall working capital management, before increasing again to 178 days in 2024. Despite improvement in 2023, the high value in 2024 suggests challenges in cash flow efficiency, likely influenced by the prolonged inventory and payables periods.