HP Inc (HPQ)
Inventory turnover
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Cost of revenue | US$ in thousands | 42,210,000 | 50,647,000 | 50,053,000 | 46,202,000 | 47,586,000 |
| Inventory | US$ in thousands | 6,862,000 | 7,614,000 | 7,930,000 | 5,963,000 | 5,734,000 |
| Inventory turnover | 6.15 | 6.65 | 6.31 | 7.75 | 8.30 |
October 31, 2023 calculation
Inventory turnover = Cost of revenue ÷ Inventory
= $42,210,000K ÷ $6,862,000K
= 6.15
The inventory turnover ratio measures how efficiently a company is managing its inventory by indicating how many times a company's inventory is sold and replaced over a specific period. A higher inventory turnover ratio generally indicates more efficient inventory management.
Based on the data provided, HP Inc's inventory turnover has shown a decreasing trend over the past five years. In 2019, the inventory turnover was 8.30, and this has declined steadily to 6.15 in 2023. This indicates that HP Inc is taking longer to sell its inventory and replace it with new stock.
A declining inventory turnover ratio could signify several things. It may indicate that the company is overstocking or facing difficulties in selling its products. It could also suggest inefficiencies in the production or supply chain processes, leading to excess inventory.
Investors and stakeholders may be concerned about this trend, as it could tie up cash in inventory and lead to potential obsolescence or markdowns. However, it's important to consider industry benchmarks and company-specific factors when interpreting this ratio.
Further analysis and comparison with industry averages and competitors' performance are necessary to understand the underlying reasons for the declining inventory turnover and to assess its potential impact on HP Inc's overall operations and financial performance.
Peer comparison
Oct 31, 2023