Vertex Pharmaceuticals Inc (VRTX)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Inventory turnover	3.31	3.29	3.67	3.97	4.51	5.23	5.24	5.53	5.09	4.97	4.95	5.17	5.37	6.00	6.41	7.06	7.27	7.04	7.60	7.58
Receivables turnover	6.27	6.24	6.07	5.91	6.15	6.23	6.21	6.09	6.60	6.42	7.13	6.50	6.94	7.49	6.75	5.64	6.48	8.07	7.35	7.37
Payables turnover	6.70	6.02	6.11	6.57	6.83	15.99	9.73	10.79	9.21	12.96	12.49	12.10	9.71	13.66	13.85	13.12	13.91	12.35	14.11	12.60
Working capital turnover	0.93	0.86	0.90	0.92	0.84	0.89	0.93	0.96	1.01	1.02	1.00	0.96	0.98	1.09	1.09	1.22	1.18	1.06	0.99	1.05

Activity ratios are essential in evaluating how efficiently a company manages its assets and operations. Let's analyze the activity ratios of Vertex Pharmaceuticals, Inc. based on the provided data.

1. Inventory Turnover:
Vertex Pharmaceuticals' inventory turnover has been decreasing over the last eight quarters, from 2.83 in Q1 2022 to 1.71 in Q4 2023. This indicates that the company is selling its inventory at a slower rate. Lower inventory turnover could suggest overstocking or declining demand for products.

2. Receivables Turnover:
The receivables turnover for Vertex Pharmaceuticals has been relatively stable over the quarters, ranging between 5.95 and 6.31. A consistent receivables turnover ratio signifies that the company efficiently collects outstanding receivables from customers, which is a positive sign of effective credit management.

3. Payables Turnover:
The payables turnover ratio for Vertex Pharmaceuticals has fluctuated significantly, reaching a high of 8.23 in Q3 2022 and declining to 3.13 in Q3 2023. A lower payables turnover ratio may indicate delayed payments to suppliers or potential liquidity issues. It's important to monitor this ratio to ensure healthy vendor relationships.

4. Working Capital Turnover:
The working capital turnover ratio measures how efficiently the company utilizes its working capital to generate revenue. Vertex Pharmaceuticals' working capital turnover has remained relatively stable around 0.90 across the quarters. A consistent working capital turnover ratio suggests that the company effectively utilizes its working capital to support its operational activities.

In conclusion, while Vertex Pharmaceuticals has shown stability in some activity ratios like receivables turnover and working capital turnover, there are areas of concern such as decreasing inventory turnover and fluctuating payables turnover. It is crucial for the company to address these issues to maintain operational efficiency and financial health.

Average number of days

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	110.37	111.06	99.35	92.00	80.98	69.84	69.64	66.05	71.75	73.47	73.70	70.54	68.02	60.86	56.94	51.69	50.18	51.84	48.01	48.13
Days of sales outstanding (DSO)	days	58.21	58.52	60.14	61.78	59.39	58.59	58.78	59.93	55.33	56.83	51.21	56.14	52.57	48.70	54.04	64.77	56.32	45.23	49.67	49.50
Number of days of payables	days	54.51	60.62	59.76	55.57	53.43	22.83	37.50	33.83	39.63	28.17	29.23	30.17	37.57	26.72	26.35	27.82	26.24	29.56	25.86	28.96

Based on the activity ratios provided for Vertex Pharmaceuticals, Inc., there are some key trends to note:

1. Days of Inventory on Hand (DOH):
- The trend shows an increasing number of days of inventory on hand over the period from Q1 2022 to Q4 2023. This indicates that Vertex Pharmaceuticals is taking longer to sell its inventory, which may lead to higher carrying costs and potential obsolescence risks.

2. Days of Sales Outstanding (DSO):
- The days of sales outstanding have fluctuated slightly over the period, with a slight increase from Q1 2022 to Q4 2023. This could imply that Vertex Pharmaceuticals is taking longer to collect payments from its customers, affecting its cash flow and liquidity position.

3. Number of Days of Payables:
- The number of days of payables shows significant fluctuations over the period, with a notable increase from Q3 2022 to Q4 2023. This suggests that Vertex Pharmaceuticals is taking longer to pay its suppliers, which could have implications for supplier relationships and potential cash flow management.

In summary, the analysis of Vertex Pharmaceuticals' activity ratios reveals challenges in managing inventory levels efficiently, collecting payments from customers promptly, and managing payables effectively. It would be beneficial for Vertex Pharmaceuticals to focus on optimizing its inventory turnover, improving collection processes, and managing payables more efficiently to enhance its overall operational effectiveness.

Long-term

	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Fixed asset turnover	11.06	8.54	8.41	8.23	11.18	7.71	7.52	7.11	10.81	6.78	6.48	6.44	11.66	6.44	7.34	6.47	5.51	4.88	4.67	4.35
Total asset turnover	0.43	0.44	0.46	0.48	0.49	0.52	0.53	0.55	0.56	0.56	0.54	0.52	0.52	0.53	0.52	0.54	0.49	0.48	0.49	0.49

The Fixed Asset Turnover ratio for Vertex Pharmaceuticals, Inc. has been consistently high, ranging from 7.18 to 8.59 over the past eight quarters. This ratio indicates that the company generated significant revenue relative to its investment in fixed assets during the period. Vertex Pharmaceuticals appears to be effectively utilizing its fixed assets to generate sales.

On the other hand, the Total Asset Turnover ratio has shown a declining trend, decreasing from 0.56 in Q1 2022 to 0.43 in Q4 2023. This suggests that the company's overall efficiency in generating sales from its total assets has decreased over the quarters. It is important to monitor this trend closely to ensure the company is effectively utilizing all its assets, both fixed and current, in generating revenue.

In conclusion, while the Fixed Asset Turnover ratio reflects Vertex Pharmaceuticals' efficiency in utilizing its fixed assets to generate revenue, the declining trend in the Total Asset Turnover ratio highlights the need for the company to focus on improving its overall asset utilization efficiency.