CVS Health Corp. (NYSE:CVS)

Inventory Turnover

The inventory turnover ratio demonstrates a clear upward trend over the periods analyzed. Starting at 12.57 in March 2021, it steadily increased with some minor fluctuations, reaching 18.74 by March 2025. This indicates an improvement in inventory management efficiency, with the company able to sell and replenish inventory more frequently over time.

Receivables Turnover

The receivables turnover ratio remains relatively stable in the early periods, ranging around 11.3 to 11.9 between 2021 and early 2023. However, it shows a decline from mid-2023 onwards, dropping from approximately 11.16 to 9.51 by March 2025. This suggests a slowing in the collection of receivables, potentially signaling extended credit terms or delays in customer payments.

Payables Turnover

The payables turnover ratio exhibits variability but generally maintains a level between 18 and 22. Notably, it peaks around the first quarter of 2023 at 22.08 and remains relatively high thereafter, though with some decline toward 19.7 by March 2025. This pattern suggests some fluctuation in the company's payment practices to suppliers but an overall tendency to pay relatively promptly.

Average Inventory Processing Period

This metric steadily decreases from 29 days in March 2021 to as low as 19 days in several quarters from March 2024 onwards. The reduction indicates faster inventory turnover and more efficient inventory processing times, aligning with the increasing inventory turnover ratio.

Average Receivable Collection Period

The average receivable collection period is relatively steady around 31-32 days initially but shows an upward shift starting from late 2023, rising to 38 days by March 2025. This reflects elongation in the time taken to collect payments from customers, consistent with the declining receivables turnover ratio.

Operating Cycle

The operating cycle, which combines inventory turnover and receivables collection, generally shortens from 61 days in early 2021 down to approximately 52 days around 2024, before slightly increasing again to 57 days by March 2025. This indicates initial improvements in overall operational efficiency followed by a modest reversal.

Average Payables Payment Period

The average payables payment period remains fairly constant, fluctuating between 16 to 20 days without a clear long-term trend. This stability signifies consistent payment behavior towards suppliers across the periods examined.

Cash Conversion Cycle

The cash conversion cycle decreases from 43 days in early 2021 to a low of 35 days in mid-2024, reflecting improving cash flow management through accelerated inventory turnover and stable payment cycles. However, a slight increase back to 38-39 days occurs by March 2025, indicating some easing in these efficiencies.

The company's cost of revenues demonstrates a generally upward trajectory across the observed periods, with fluctuations reflecting seasonal and market conditions. Starting at approximately 56,598 million US dollars in the first quarter of 2021, the cost increased steadily, peaking at around 84,811 million US dollars by the fourth quarter of 2024 before experiencing a slight decline to 80,192 million US dollars by the first quarter of 2025. Despite some periodic variations, the overall pattern suggests consistent growth in the scale or activity level contributing to revenue costs.

Inventories display a more variable trend compared to the cost of revenues. The inventory level began at about 17,618 million US dollars in early 2021, fluctuating moderately over the subsequent quarters. It reached highs near 19,090 million US dollars in the fourth quarter of 2021 and again around 18,107 million US dollars in the fourth quarter of 2024, while dipping to lows near 16,068 million US dollars in the second quarter of 2024. This volatility may indicate adjustments in inventory management strategies or responses to shifting demand and supply conditions.

The inventory turnover ratio reveals a strengthening efficiency in the management of inventory relative to the cost of revenues. Beginning at a ratio of approximately 12.57 in the first quarter of 2021, the turnover ratio consistently improved, reaching levels above 18 in the latter part of the observed timeframe. This increase in inventory turnover suggests that the company is increasingly effective in converting inventory into sales, implying improvements in operational efficiency, demand forecasting, or supply chain management.

Cost of Revenues

Steady increase from 56,598 million to a peak of 84,811 million before a slight decline to 80,192 million, indicating growth with some seasonal or market variability.

Inventories

Moderate fluctuations with peaks and troughs over the periods, reflecting potential adjustments in inventory levels in response to market demands or internal strategies.

Inventory Turnover Ratio

Progressive increase from 12.57 to above 18, indicating enhanced efficiency in inventory utilization and turnover relative to revenue cost over time.

The analysis of the quarterly financial data reveals several noteworthy trends in the company's revenue, accounts receivable, and receivables turnover over the examined periods.

Revenues from Customers

Revenues demonstrated a general upward trajectory from March 2021 to December 2024, increasing from approximately $68.8 billion to a peak near $94.9 billion. This growth was relatively steady, with some fluctuations but no significant declines during this period. Notably, the revenue slightly dipped in the first quarter of 2025 to about $94.1 billion, indicating a minor decrease after a period of consistent growth.

Accounts Receivable, Net

The net accounts receivable showed a persistent increase across the timeline, starting at around $23.9 billion in the first quarter of 2021 and rising to approximately $39.6 billion by the first quarter of 2025. This growth suggests an increase in credit sales or longer collection periods. It is also observable that the accounts receivable increased at a faster pace than revenues during some periods, hinting at potential changes in credit policies or collection efficiency.

Receivables Turnover Ratio

The receivables turnover ratio fluctuated over the quarters but demonstrated a declining trend from an initial 11.32 in March 2021 to 9.51 in the first quarter of 2025. The downward trend in this ratio implies a reduction in the efficiency of collecting receivables. A lower turnover ratio typically indicates that the company is taking longer to collect payments from customers, which might have implications for cash flow management.

Intermediate fluctuations were noticeable, with periods of slight improvement, but the overall movement was downward, aligning with the increasing accounts receivable balance.

In summary, while revenue growth has been commendable and largely consistent, the simultaneous increase in accounts receivable and declining receivables turnover ratio suggest a potential weakening in the collection process. This trend could affect liquidity and warrants further monitoring to ensure that receivables management remains effective and does not adversely impact working capital.

The analysis of the quarterly financial data reveals distinct trends over the examined periods for cost of revenues, accounts payable, and payables turnover ratio.

Cost of Revenues

The cost of revenues demonstrates a generally increasing trend from March 2021 through December 2024, with a peak in the fourth quarter of 2024 at 84,811 million US dollars. Initial values started around 56,598 million in the first quarter of 2021 and steadily increased each quarter with some fluctuations, reaching the highest amounts in late 2023 and throughout 2024. However, in the first quarter of 2025, a slight decline is observed with a reduction to 80,192 million, suggesting a recent decrease after the continuous growth over the previous years.

Accounts Payable

Accounts payable exhibits a fluctuating but overall upward movement, starting at 10,804 million in the first quarter of 2021 and rising to 16,534 million by the first quarter of 2025. This indicates increasing liabilities related to purchases or expenses on credit. Notable increases occur in the fourth quarter of 2022 and persist through 2024 into early 2025. There are minor quarterly declines or plateaus at different points, such as between the fourth quarter of 2021 and the first quarter of 2022, but the general trajectory is upward.

Payables Turnover Ratio

The payables turnover ratio reflects how many times the company pays off its accounts payable during a period. The ratio starts at 20.5 in the first quarter of 2021 and shows some volatility throughout the timeline. A decline is visible from mid-2021 through the end of 2022, reaching a low near 18.07 by the fourth quarter of 2022. Subsequently, the ratio increases notably at the beginning of 2023, surpassing 22.0 in the first quarter, indicating a quicker payment cycle or more efficient payables management. However, from mid-2023 onwards to early 2025, the ratio declines gradually, stabilizing in the range of about 19.7 to 20.4, which suggests a moderation in payment speed or turnover frequency.

In summary, the data indicates that while the cost of revenues and accounts payable generally increased over the period, signifying growth in operational size and related credit transactions, the payables turnover ratio experienced volatility with a notable dip in 2022 followed by a recovery and subsequent stabilization. This pattern may reflect changes in supplier payment policies, cash flow management strategies, or operational scaling effects impacting the timing and frequency of payable settlements.

The analysis of the financial trends reveals several notable patterns across working capital, revenues from customers, and the working capital turnover ratio for the periods examined.

Working Capital

The working capital figures show a consistently negative balance throughout the observed periods, indicating that current liabilities exceed current assets. Starting with -4,385 million US dollars in the first quarter of 2021, the negative working capital deepens significantly to its lowest point at -17,284 million US dollars in the third quarter of 2024. There are fluctuations but an overall downward trend is evident, with some quarters such as the second quarter of 2023 showing substantial deterioration to -11,450 million US dollars. The data suggests ongoing liquidity pressure despite occasional periods of relative improvement (e.g., at the end of 2021 and early 2022), with the most recent quarters maintaining very high negative levels.

Revenues from Customers

Revenues show a generally increasing trend over the quarters from 68,800 million US dollars in the first quarter of 2021 to a peak of approximately 96,955 million US dollars in the fourth quarter of 2024. Despite some fluctuations, such as a slight dip around early 2024, overall revenue growth is consistent and steady, reflecting positive top-line performance and market demand. The increase from 2021 to 2025 indicates strengthened sales and potentially effective pricing or volume strategies.

Working Capital Turnover Ratio

The working capital turnover ratio data is missing throughout the periods, preventing direct calculation or assessment. However, given the observed negative and worsening working capital figures alongside increasing revenues, it can be inferred that the turnover ratio is likely to be high or unstable. This situation may point to operational challenges related to managing short-term assets and liabilities efficiently.

In summary, the company demonstrates robust revenue growth but concurrently faces persistent and deepening negative working capital positions. The financial dynamics suggest pressure on liquidity and operational efficiency, underscoring the importance of monitoring current asset and liability management. Without specific data on the working capital turnover ratio, conclusions must be drawn cautiously, but the available figures hint at a possible mismatch between sales growth and working capital adequacy.

Inventory Turnover

The inventory turnover ratio demonstrates a consistent upward trend over the analyzed quarters, increasing from 12.57 at the beginning of the period to 18.74 by the latest date. This signifies an improvement in how efficiently inventory is being managed and sold. Notably, there are gradual increments each quarter, with the ratio rising more significantly starting from early 2023. The data suggests a strengthening operational efficiency related to inventory management.

Average Inventory Processing Period

The average inventory processing period, expressed in days, shows a generally decreasing trend over time, moving from 29 days initially down to 19 days in the most recent quarter. This decline corresponds with the rise in inventory turnover, indicating faster inventory cycles. While there are minor fluctuations, the overall reduction in processing days suggests improved inventory handling and turnover efficiency.

Overall Analysis

The inverse relationship between inventory turnover and average processing period is evident, aligning with standard inventory management principles. The consistent improvement in turnover ratio and reduction in processing days imply enhanced supply chain effectiveness, better stock management, and potentially stronger sales performance. These trends may contribute positively to operational profitability and cash flow management.

Receivables Turnover Trend

The receivables turnover ratio exhibited relative stability throughout the observed periods from March 2021 to March 2025, with values generally fluctuating around 11. Notable is a gradual decline beginning in late 2022, where the ratio decreased from approximately 11.79 in December 2022 to 9.51 by March 2025. This declining trend suggests a lengthening in the time taken to collect receivables over the later quarters.

Average Receivable Collection Period

The average receivable collection period remained mostly stable between 31 and 32 days from March 2021 through June 2023. Starting in the third quarter of 2023, this metric began to increase, reaching up to 38 days by March 2025. The increasing collection period corroborates the downward trend observed in the receivables turnover ratio, indicating a slower collection process in recent quarters.

Relationship Between Metrics

There is a clear inverse relationship between receivables turnover and average collection period, as expected. Earlier periods featured a higher turnover and correspondingly shorter collection days, while later periods exhibit a reduction in turnover alongside lengthening days of receivables collection. This pattern could imply changes in credit policies, customer payment behaviors, or operational efficiency in receivables management.

Summary Insights

Overall, the data points to a deterioration in receivables management efficiency over the reviewed timeline. While the early phase showed consistent and efficient receivables turnover, the later phase indicates increasing challenges in timely collections, potentially affecting cash flow. Monitoring this trend is advisable to identify underlying causes and implement corrective measures if necessary.

The analysis of the quarterly financial data reveals notable trends in the average inventory processing period, the average receivable collection period, and the operating cycle over the observed time frame.

Average Inventory Processing Period

This metric shows a consistent decreasing trend from 29 days at the start of the period to 19 days by the end of the period. There are minor fluctuations, such as a slight increase from 19 to 21 days late in the series; however, the overall pattern indicates an improvement in inventory turnover efficiency. The reduction from 29 to 19 days suggests that inventory is being processed more quickly, which could positively impact operational efficiency and cash flow.

Average Receivable Collection Period

The average days to collect receivables remain relatively stable initially, fluctuating narrowly around 31 to 32 days during the early quarters. However, beginning around early 2023, there is a noticeable upward trend, increasing from 31 days to 38 days by the end of the period. This increase indicates a slower collection process of receivables, which could potentially strain working capital if receivables are not converted into cash promptly.

Operating Cycle

The operating cycle, calculated as the sum of the inventory processing period and the receivable collection period, generally follows the combined impact of the two individual metrics. It initially decreases from 61 days to a low of 52 days, indicating improved operational efficiency. However, starting mid-2023, it rises back to around 57 days, likely driven by the lengthening receivable collection period despite continued efficiency in inventory processing. This suggests that while inventory management has improved, the overall cash conversion cycle is being extended by slower receivables turnover.

In summary, the data depicts enhanced inventory management reflected by shorter processing times, but this improvement is partially offset by slower collection of accounts receivable. Consequently, the operating cycle initially contracts but then extends towards the latter periods, highlighting the need for focus on receivables management to optimize the overall working capital cycle.

The payables turnover ratio exhibits fluctuations over the presented periods with notable variations. Initially, the ratio maintained a level slightly above 20 before experiencing a decline through late 2021 and all of 2022, reaching a low near 18. Following this trough, the turnover ratio rebounded significantly in early 2023, reaching above 22 at multiple points, but then gradually tapered off toward a value close to 20 by early 2025. This pattern suggests periods of accelerating and decelerating payment cycles toward suppliers, reflecting changing operational or credit terms dynamics.

Correspondingly, the average payables payment period, measured in days, moved inversely to the turnover ratio as expected. Beginning with an average payment period of approximately 18 days, it extended slightly toward 20 days during late 2021 and throughout 2022, indicating slower payments. In 2023, the payment period shortened to around 16-17 days, aligning with the observed spike in payables turnover ratio, signifying quicker settlement of payables. However, the payment period lengthened again mildly towards 18-19 days by early 2025. This cyclical behavior highlights shifts in the company’s payment practices over the analyzed timeframe.

Overall, the interplay between the payables turnover and the average payment period reveals deliberate or market-driven variations in the timing of payables settlements. Periods of high turnover and reduced payment periods may indicate improved liquidity management or stronger negotiating positions with creditors, whereas periods of slower turnover and longer payment durations could suggest strategic stretches of payables to conserve cash or respond to external financial conditions.

The analysis of the financial time periods reveals several key trends in the company's working capital management metrics over the examined quarters.

Average Inventory Processing Period

The inventory days steadily decreased from 29 days in early 2021 to 19 days by the first quarter of 2025, indicating progressively more efficient inventory turnover. This reduction reflects improved inventory management and faster movement of goods through the supply chain.

Average Receivable Collection Period

The receivable collection days remained relatively stable around 31 to 32 days during the initial periods but showed an increasing trend starting around late 2022. By the first quarter of 2025, the average collection period extended to 38 days. This increase suggests a lengthening in the time it takes to collect payments from customers, which may indicate relaxed credit terms or slower collections.

Average Payables Payment Period

The payment period to suppliers fluctuated moderately between 16 and 20 days across the reviewed timeline, with no clear long-term upward or downward trend. The relatively stable range implies consistent payment practices, although slight variations could relate to timing or strategic supplier negotiations.

Cash Conversion Cycle

The cash conversion cycle (CCC) showed a gradual decline from 43 days in early 2021 to a low near 35 days in mid-2024, highlighting improved overall working capital efficiency during that period. However, the CCC then experienced a slight increase, settling around 38 days by the first quarter of 2025. This pattern suggests an initial enhancement in the management of inventory, receivables, and payables, followed by a moderate reversal primarily influenced by the elongation of receivables collection.

In summary, the company demonstrated notable improvements in inventory turnover and maintained stable payment periods, which contributed to a more efficient cash conversion cycle through mid-2024. Conversely, the increasing receivables collection period in recent quarters may warrant attention to mitigate potential liquidity pressures.