Vertex Pharmaceuticals Inc (VRTX)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	3.31	4.51	5.09	5.55	7.50
Receivables turnover	6.27	6.15	6.60	6.93	6.48
Payables turnover	6.70	6.83	9.21	10.05	14.34
Working capital turnover	0.93	0.84	1.01	0.98	1.18

Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate revenue. Let's analyze the activity ratios of Vertex Pharmaceuticals, Inc. based on the provided data.

1. Inventory turnover:
- The inventory turnover ratio measures how effectively a company manages its inventory levels. A higher ratio indicates that inventory is moving quickly, which is preferable.
- Vertex's inventory turnover has seen a declining trend over the last five years, from 3.27 in 2019 to 1.71 in 2023. This may suggest that Vertex is managing its inventory less efficiently in recent years.

2. Receivables turnover:
- The receivables turnover ratio shows how efficiently a company collects its accounts receivable. A higher ratio implies faster collection, which is positive.
- Vertex's receivables turnover has fluctuated slightly but has remained relatively stable over the period, ranging from 6.19 to 7.01. This indicates that Vertex has been consistent in collecting its receivables.

3. Payables turnover:
- The payables turnover ratio reflects how quickly a company pays its suppliers. A lower ratio may indicate longer payment cycles, which could be beneficial for cash flow management.
- Vertex's payables turnover has also seen a declining trend over the years, from 6.25 in 2019 to 3.46 in 2023. This suggests that Vertex is taking longer to pay its suppliers, which could impact relationships with vendors.

4. Working capital turnover:
- The working capital turnover ratio measures how effectively a company utilizes its working capital to generate revenue. A higher ratio indicates better utilization of resources.
- Vertex's working capital turnover has fluctuated, with a general decreasing trend from 1.19 in 2019 to 0.93 in 2023. This indicates a potential decline in the efficiency of using working capital to generate revenue.

In summary, Vertex Pharmaceuticals, Inc. should focus on improving its inventory turnover and payables turnover to enhance operational efficiency and liquidity management. The stable receivables turnover suggests effective collection practices. Additionally, monitoring working capital turnover can provide insights into the overall efficiency of resource utilization.

Average number of days

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	110.37	80.98	71.75	65.79	48.68
Days of sales outstanding (DSO)	days	58.21	59.39	55.33	52.67	56.32
Number of days of payables	days	54.51	53.43	39.63	36.34	25.46

The activity ratios for Vertex Pharmaceuticals, Inc. provide insights into the efficiency of the company's operations and management of its assets and liabilities.

1. Days of Inventory on Hand (DOH): This ratio indicates the number of days the company holds inventory before it is sold. Vertex's DOH has been increasing over the years, reaching 213.64 days in 2023 from 111.62 days in 2019. This suggests that the company may be carrying excess inventory or facing challenges in selling its products efficiently.

2. Days of Sales Outstanding (DSO): DSO reflects the average number of days it takes for the company to collect payment after making a sale. Vertex's DSO has fluctuated slightly but has remained relatively stable around 55-60 days. This indicates that the company has been successful in managing its accounts receivable and collecting payments within a reasonable timeframe.

3. Number of Days of Payables: This ratio shows the number of days the company takes to pay its suppliers. Vertex's days of payables have increased significantly over the years, from 58.38 days in 2019 to 105.52 days in 2023. This suggests that the company is taking longer to pay its suppliers, which may indicate potential liquidity issues or a deliberate strategy to manage cash flow.

Overall, the analysis of Vertex Pharmaceuticals, Inc.'s activity ratios highlights areas where the company may need to focus on improving operational efficiency, inventory management, and working capital management to enhance overall financial performance.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	11.06	11.18	10.81	11.64	5.51
Total asset turnover	0.43	0.49	0.56	0.52	0.49

The long-term activity ratios of Vertex Pharmaceuticals, Inc. provide insights into how efficiently the company is utilizing its fixed assets and total assets to generate revenue over the years.

The fixed asset turnover ratio has been steadily increasing from 5.59 in 2019 to 8.51 in 2023. This indicates that Vertex Pharmaceuticals is generating more revenue per dollar of fixed assets invested, reflecting improved efficiency in utilizing its long-term assets to generate sales. A higher fixed asset turnover ratio is generally favorable as it suggests that the company is effectively managing its fixed assets to generate revenue.

On the other hand, the total asset turnover ratio has fluctuated over the years, from 0.50 in 2019 to 0.43 in 2023. Although the ratio has decreased in recent years, it still indicates that Vertex Pharmaceuticals is generating revenue at a reasonable level relative to its total assets. A low total asset turnover may suggest that the company could potentially improve its asset utilization efficiency.

In summary, the increasing trend in the fixed asset turnover ratio reflects improved efficiency in utilizing long-term assets, while the fluctuation in the total asset turnover ratio suggests the need for Vertex Pharmaceuticals to continuously monitor and optimize its overall asset utilization to drive revenue growth and profitability.