High Cash Conversion Cycle Means Companies Are Vulnerable – ValueWalk Premium
Cash Conversion Cycle

High Cash Conversion Cycle Means Companies Are Vulnerable

Global: Peaking net profit margin for Large and Medium companies, tough time for Small

Q4 hedge fund letters, conference, scoops etc

Cash Conversion Cycle


  • Looking at all non-financial companies globally, grouped by size
  • Large and Medium companies are seeing peaking net margins
  • Small companies have had a tough time with negative margin in the past three years

Global: Falling efficiency due to malinvestment

Cash Conversion Cycle


  • Fall in asset turnover hasn’t come from higher asset growth, but lower sales
  • Following the Global Financial Crisis (GFC), low-interest rate policies have led to malinvestments among corporates
  • Small companies have seen the largest fall in efficiency

Global: Cash conversion cycle shows vulnerability to a credit crunch and/or economic slowdown

Cash Conversion Cycle


  • Cash conversion cycle (CCC) has risen for all companies following the GFC, but most for Small and Medium companies
  • The high CCC means that companies are more vulnerable to a credit crunch and/or economic slowdown

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