Devon Energy Corp. (NYSE:DVN)

Inventory Turnover

The inventory turnover ratio shows a decline, decreasing from 55.87 in 2021 to 42.67 in 2022. This indicates that inventory is being sold or used at a slower rate in the most recent year.

Receivables Turnover

The receivables turnover ratio experienced a drop from 12.13 in 2018 to a low point near 7.48 in 2019, followed by minor fluctuations. It increased significantly to 10.85 in 2022, suggesting improved efficiency in collecting receivables in the latest year after a period of relative stagnation.

Payables Turnover

Payables turnover remained relatively stable with a slight increase peaking at 12.96 in 2020, then decreased to 9.98 in 2022. The recent reduction indicates that payables are being settled more slowly compared to the peak years.

Working Capital Turnover

This ratio exhibited notable volatility. It declined steadily from 4.85 in 2018 to 2.65 in 2020, then surged sharply to 10.5 in 2021 and further to 24.39 in 2022. The strong increase over the last two years suggests a much more efficient use of working capital to generate sales or revenue.

Average Inventory Processing Period

Average inventory processing period increased modestly from 7 days in 2021 to 9 days in 2022, consistent with the decline in inventory turnover.

Average Receivable Collection Period

The average collection period worsened from 30 days in 2018 to a peak of 49 days in 2019, then improved to 34 days in 2022. This reflects initial challenges in collections followed by a recovery in collection efficiency.

Operating Cycle

The operating cycle, which sums the inventory and receivables periods, shortened from 53 days in 2021 to 43 days in 2022. This implies an overall improvement in the speed of converting inventory and receivables into cash.

Average Payables Payment Period

The average payment period increased from 28-29 days in 2020-2021 to 37 days in 2022, indicating a longer duration taken to pay suppliers, consistent with the decline in payables turnover.

Cash Conversion Cycle

The cash conversion cycle showed a significant reduction from 24 days in 2021 down to just 6 days in 2022. This improvement suggests enhanced efficiency in managing the timing between cash outflows and inflows.

The cost of revenues for the company exhibited notable fluctuations over the five-year period analyzed. Initially, there was a sharp decline from 6,588 million US dollars at the end of 2018 to 4,009 million US dollars in 2019, followed by a further decrease to 3,136 million US dollars in 2020. This downward trend reversed in 2021, with the cost rising significantly to 6,369 million US dollars, and then increasing further to 8,577 million US dollars in 2022, marking the highest value in the given timeframe.

Inventory data is available only for the last two years, showing an increase from 114 million US dollars in 2021 to 201 million US dollars in 2022. Correspondingly, the inventory turnover ratio, a measure of how efficiently inventory is managed, decreased from 55.87 in 2021 to 42.67 in 2022. This decline indicates that inventory was turning over less frequently in 2022 compared to the previous year, which may suggest a slower rate of sales or an accumulation of inventory.

Overall, the observed financial trends suggest a period of cost reduction from 2018 to 2020, followed by a strong rise in costs through 2022. The increase in inventory paired with a decreasing turnover ratio in the final two years could point toward changes in sales dynamics or inventory management practices that merit further investigation.

The financial data reveals several notable trends over the five-year period ending December 31, 2022.

Revenues

Revenues experienced a significant decline from 2018 to 2020, falling from $10,734 million in 2018 to $4,828 million in 2020. This downward trend was followed by a strong recovery, with revenues increasing sharply to $12,206 million in 2021 and further to $19,169 million in 2022. The rebound in revenues suggests a substantial improvement in business performance or market conditions post-2020.

Accounts Receivable

Accounts receivable generally decreased from $885 million in 2018 to $601 million in 2020, aligning with the lower revenue levels during the same period. However, there was a marked increase in accounts receivable to $1,543 million in 2021 and $1,767 million in 2022, paralleling the rise in revenues. This increase may reflect higher credit sales or extended payment terms associated with the revenue growth in those years.

Receivables Turnover Ratio

The receivables turnover ratio shows variability over the period. It dropped from a high of 12.13 in 2018 to a low of 7.48 in 2019, remaining relatively stable around 8.00 in 2020 and 2021 before increasing to 10.85 in 2022. The initial decline indicates a slowing in the speed of collecting receivables, which may signal less efficient credit management or adverse changes in customer payment behavior. The higher ratio in 2022, closer to the 2018 level, suggests an improvement in collection efficiency or credit policies.

Overall, the data indicates a challenging period culminating in 2020, followed by robust growth and some recovery in operational efficiency in 2022. The increased levels of accounts receivable in line with soaring revenues warrant attention to credit risk management and cash flow implications.

The financial data reveals several notable trends regarding costs and payables over the five-year period ending in 2022.

Cost of Revenues

The cost of revenues exhibited a declining trend from 2018 to 2020, decreasing from 6,588 million USD in 2018 to 3,136 million USD in 2020. This represents a significant reduction, potentially indicating improved cost efficiencies, reduced production scale, or changes in operational strategy during that period. However, from 2020 onwards, the cost of revenues rose sharply, reaching 6,369 million USD in 2021 and further increasing to 8,577 million USD in 2022. The sharp increase in these last two years could reflect rising input prices, increased production activities, or other macroeconomic factors impacting costs.

Accounts Payable

The accounts payable values followed a generally decreasing trajectory from 662 million USD in 2018 to a low of 242 million USD in 2020. This decline aligns with the reduction in cost of revenues during the same timeframe. However, in 2021, accounts payable nearly doubled to 500 million USD and further increased to 859 million USD in 2022, surpassing the 2018 level. This rise corresponds with the upsurge in costs and may indicate extended payment terms or increased purchasing activity.

Payables Turnover Ratio

The payables turnover ratio decreased from 9.95 in 2018 to 9.37 in 2019, suggesting a slightly slower rate of paying suppliers relative to credit purchases. This was followed by an increase to 12.96 in 2020 and a marginal decrease to 12.74 in 2021. The higher turnover ratios in these years imply quicker payments to suppliers, possibly reflecting improved cash management or favorable supplier terms during that period. In 2022, the ratio decreased to 9.98, which is more aligned with the early years. This shift potentially signals a return to slower payment cycles or changes in purchasing dynamics.

The financial data reveals several notable trends over the five-year period ending in 2022. Working capital, expressed in millions of US dollars, has consistently decreased each year, falling from 2,211 million in 2018 to 786 million in 2022. This decline indicates a reduction in the company's short-term assets relative to its short-term liabilities, which may reflect changes in operational efficiency or liquidity management.

Revenues, also reported in millions of US dollars, have exhibited fluctuation followed by strong growth. The company experienced a substantial dip from 10,734 million in 2018 to 4,828 million in 2020. However, there was a recovery and subsequent robust increase in revenues, reaching 19,169 million by the end of 2022. This suggests the company successfully navigated a challenging period, possibly improving its market position or benefiting from favorable market conditions after 2020.

The working capital turnover ratio, which measures how efficiently working capital is used to generate revenues, shows significant variation. It declined from 4.85 in 2018 to 2.65 in 2020, indicating less efficient use of working capital during this period. Nonetheless, this ratio then increased sharply to 24.39 by 2022, the highest ratio in the timeframe. The high ratio in 2022 suggests greatly enhanced efficiency in utilizing working capital to generate sales, aligning with the substantial revenue growth observed.

Working Capital

Decreased steadily over five years, signaling reduced short-term asset availability or adjustments in working capital management.

Revenues

Experienced decline until 2020 followed by strong recovery and growth, nearly doubling from 2021 to 2022.

Working Capital Turnover

Initially decreased through 2020, then improved sharply by 2022, indicating more effective utilization of working capital in generating sales.

Overall, the data points to the company improving operational efficiency and revenue generation in the latter part of the period, despite a declining trend in working capital. The sharp increase in working capital turnover alongside revenue growth in 2022 suggests a strategic shift or market conditions that enhanced performance metrics significantly during this time.

The analysis of the provided financial ratios over the specified periods reveals notable trends in inventory management efficiency.

Inventory Turnover Ratio

The inventory turnover ratio is available for the years ending December 31, 2021, and December 31, 2022. The ratio decreased from 55.87 in 2021 to 42.67 in 2022. This decline indicates that the company turned over its inventory fewer times in 2022 compared to the previous year, which may suggest a slowdown in sales or an increase in inventory levels relative to cost of goods sold.

Average Inventory Processing Period

The average inventory processing period, expressed in number of days, increased from 7 days in 2021 to 9 days in 2022. This change corresponds inversely with the inventory turnover ratios observed, confirming that inventory remained in stock for a longer duration in 2022 before being sold or used in production.

Overall, the data suggest a trend towards slower inventory movement in 2022 compared to 2021. This could reflect changes in demand, supply chain dynamics, or inventory policy adjustments. The company might consider investigating underlying causes and potential impacts on working capital efficiency.

Receivables Turnover

The receivables turnover ratio exhibited a notable decline from 12.13 in 2018 to a low of 7.48 in 2019. Following this decrease, the ratio modestly improved to 8.03 in 2020 and remained relatively stable at 7.91 in 2021. In 2022, a significant recovery occurred, with the ratio increasing to 10.85, indicating enhanced efficiency in collecting receivables compared to the prior few years.

Average Receivable Collection Period

The average receivable collection period showed an inverse trend to the receivables turnover ratio over the observed periods. Starting at 30 days in 2018, it increased substantially to 49 days in 2019, reflecting slower collections. Subsequently, the period shortened slightly to 45 days in 2020 and remained nearly constant at 46 days in 2021. In 2022, there was a marked improvement, with the collection period decreasing significantly to 34 days, suggesting faster conversion of receivables into cash.

Summary of Trends

The data indicate a deterioration in receivables management efficiency from 2018 through 2019, as evidenced by the drop in turnover and the elongation of the collection period. From 2020 to 2021, the ratios stabilized at lower performance levels. The year 2022 marked a strong rebound in receivables turnover and a notable reduction in collection days, which suggests that measures may have been taken to improve credit control and cash flow management during this period.

Average inventory processing period

The average inventory processing period data is only available for the years ending December 31, 2021 and 2022. It shows an increase from 7 days in 2021 to 9 days in 2022, indicating a slight lengthening in the time taken to process inventory.

Average receivable collection period

The average receivable collection period demonstrates variability over the observed years. It increased significantly from 30 days in 2018 to 49 days in 2019, then slightly decreased to 45 days in 2020. It remained relatively stable at 46 days in 2021 before dropping to 34 days in 2022. Overall, this suggests initial challenges in receivables collections that improved notably by the end of the period analyzed.

Operating cycle

The operating cycle data is available only for 2021 and 2022. It decreased from 53 days in 2021 to 43 days in 2022. This reduction indicates an improvement in the time taken to convert inventory and receivables into cash, which may reflect enhanced operational efficiency.

Payables Turnover Ratio

The payables turnover ratio demonstrates variability over the analyzed period. It declined slightly from 9.95 in 2018 to 9.37 in 2019, suggesting a slower rate of settling payables. However, there was a notable increase in 2020 to 12.96, indicating a significant improvement in the frequency of paying suppliers. This elevated turnover followed by a minor decrease to 12.74 in 2021, still maintaining a relatively high level. By 2022, the ratio decreased again to 9.98, returning close to the initial 2018 level. This fluctuation implies changes in accounts payable management strategies or supplier terms over the years.

Average Payables Payment Period

The average payables payment period inversely mirrors the payables turnover behavior. It increased slightly from 37 days in 2018 to 39 days in 2019, indicating a longer duration taken to settle payables. A sharp reduction occurred in 2020, bringing the period down to 28 days, aligned with the peak in payables turnover, reflecting quicker payments. The payment period then modestly increased to 29 days in 2021 before rising back to 37 days in 2022. This reversion to earlier levels indicates a relaxation in payment speeds and potentially extended credit terms or a strategic shift toward conserving cash flow.

Overall Insight

The observed trends point to a period of aggressive payment practices around 2020 and 2021, as seen with higher payables turnover and shorter payment days, likely aimed at optimizing supplier relationships or taking advantage of early payment discounts. The reversion in 2022 to lower turnover and longer payment periods suggests a shift in operational strategy, possibly in response to external financial conditions or internal liquidity considerations. The company appears to have balanced between maintaining supplier goodwill through prompt payments and managing cash outflows strategically.

Average Inventory Processing Period

The average inventory processing period was not reported until 2021. It was 7 days in 2021 and increased to 9 days in 2022, indicating a slight lengthening in the time inventory is held before processing.

Average Receivable Collection Period

The average receivable collection period increased significantly from 30 days in 2018 to 49 days in 2019. It then slightly decreased to 45 days in 2020 and remained relatively stable at 46 days in 2021. In 2022, there was a notable improvement as the period shortened to 34 days, suggesting enhanced efficiency in collecting receivables during the most recent year.

Average Payables Payment Period

The average payables payment period started at 37 days in 2018 and slightly increased to 39 days in 2019. It then decreased sharply to 28 days in 2020 and remained fairly stable at 29 days in 2021. In 2022, this period extended back to 37 days, aligning with the initial level observed in 2018. This indicates variability in payment practices, with a significant reduction in 2020 and 2021 followed by a return to earlier payment durations in 2022.

Cash Conversion Cycle

The cash conversion cycle was not available until 2021, when it stood at 24 days. In 2022, it improved notably, dropping to 6 days. This significant reduction suggests a marked enhancement in working capital efficiency, reflecting a shorter duration between outflow and inflow of cash relative to operational activities during the latest year.