Applied Industrial Technologies (AIT)

Short-term

Turnover ratios

The analysis of Applied Industrial Technologies' activity ratios over the period from June 30, 2021, to June 30, 2025, reveals the following trends:

Inventory Turnover:
The inventory turnover ratio fluctuated slightly but remained relatively stable. It decreased from 6.35 in 2021 to 6.01 in 2022, indicating a marginal slowdown in inventory sales or turnover. Subsequently, it increased to 6.24 in 2023, reflecting a modest improvement, and further rose to 6.44 in 2024, nearing the 2021 level. By 2025, it slightly declined to 6.29 but remained near the higher end of the range. Overall, the ratio indicates a generally stable inventory management with minor fluctuations, suggesting consistent inventory turnover efficiency.

Receivables Turnover:
The receivables turnover ratio declined from 6.27 in 2021 to 5.81 in 2022, indicating a slight deterioration in collections or credit terms. It then improved to 6.23 in 2023, suggesting better receivables management, before declining slightly again in 2024 to 6.07 and 2025 to 5.93. These fluctuations demonstrate a generally stable receivables collection process, with minor variations in efficiency over the period.

Payables Turnover:
The payables turnover ratio shows variability, with a decrease from 11.05 in 2021 to 10.36 in 2023. Notably, there was a significant increase to 11.77 in 2024, followed by a slight decline to 11.35 in 2025. This pattern suggests that the company extended its payment periods in 2024, possibly to optimize working capital, before slightly reducing its payment deferrals in 2025.

Working Capital Turnover:
This ratio varied from 4.21 in 2021 to a low of 3.53 in 2024, before rebounding to 3.74 in 2025. The decline to 3.53 indicates a decrease in efficiency in generating sales from working capital, potentially reflecting increased working capital levels or decreased sales efficiency. The subsequent increase hints at a recovery in operational efficiency or a strategic adjustment in working capital management.

Overall Observations:
- The activity ratios indicate a relatively stable operational efficiency over the analyzed years, with some minor fluctuations in inventory and receivables management.
- The company appears to have optimized its payables management in 2024, perhaps leveraging extended payment terms to improve cash flow.
- The slight decline and subsequent recovery in working capital turnover suggest ongoing efforts to balance working capital levels and sales efficiency.

These trends collectively suggest prudent management of inventory, receivables, and payables, alongside a focus on maintaining operational efficiency in working capital utilization.

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Average number of days

The activity ratios of Applied Industrial Technologies over the period from June 30, 2021, to June 30, 2025, depict a relatively stable operational efficiency with some fluctuations that warrant attention.

Days of Inventory on Hand (DOH):
The DOH fluctuated modestly, starting at 57.52 days in 2021, increasing to 60.72 days in 2022, then decreasing slightly to 58.52 days in 2023. The subsequent period saw a reduction to 56.71 days in 2024, followed by a slight increase to 58.00 days in 2025. These figures suggest that the company's inventory turnover has remained relatively consistent, with minor variances potentially reflecting inventory management practices or seasonal inventory needs. The decreasing trend from 2022 onward indicates a slight improvement in inventory efficiency, reducing inventory holding periods.

Days of Sales Outstanding (DSO):
The DSO figures exhibited some notable variation, with an increase from 58.24 days in 2021 to 62.88 days in 2022, indicating a period where receivables were outstanding longer. Subsequently, the DSO declined to 58.59 days in 2023, suggesting an improvement in receivables collection. However, the figures increased again to 60.10 days in 2024 and further to 61.56 days in 2025, signaling a trend towards lengthening receivables or slower collection periods. The upward trend in DSO after 2023 could impact the company’s cash flow and working capital management.

Number of Days of Payables:
The payable period increased from 33.03 days in 2021 to 35.03 days in 2022, then slightly to 35.23 days in 2023, reflecting a tendency to extend payment terms within suppliers. In 2024, the payables period decreased to 31.00 days but increased again to 32.15 days in 2025. The relatively stable but slightly fluctuating payable days suggest a consistent approach to managing short-term liabilities, with some tendency to extend payables possibly to optimize cash flow.

Summary:
Overall, Applied Industrial Technologies demonstrates stable inventory management with consistent inventory turnover periods. Receivables collection efficiency has experienced some deterioration in recent years, as evidenced by increasing DSO, which could affect liquidity. The company’s approach to managing payables remains consistent, with slight fluctuations that indicate careful liquidity and supplier relationship management. Continuous monitoring of receivables and payables is essential to optimize working capital and ensure operational agility.

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Long-term

The analysis of Applied Industrial Technologies' long-term activity ratios reveals noteworthy trends over the specified periods. The Fixed Asset Turnover ratio, which measures how efficiently the company utilizes its fixed assets to generate sales, exhibited significant fluctuations from June 30, 2021, to June 30, 2024. Specifically, the ratio increased markedly from 15.96 in 2021 to a peak of 34.06 in 2022, indicating a substantial improvement in fixed asset utilization during that year. Subsequently, the ratio declined to 20.46 in 2023 and further decreased to 17.79 in 2024, suggesting a reduction in the efficiency of fixed asset deployment.

In contrast, the Total Asset Turnover ratio, reflecting the overall efficiency of all assets in generating sales, demonstrated a moderate upward trend from 1.42 in 2021 to a high of 1.61 in 2023. Following this peak, the ratio decreased slightly to 1.52 in 2024, and further to 1.44 in 2025, indicating a slight decrease in overall asset utilization efficiency in the most recent period.

Overall, the company's long-term activity ratios depict an initial period of increased efficiency—particularly in fixed assets—peaking around 2022-2023, followed by a decline that suggests either a strategic shift, increased investments, or operational adjustments impacting asset utilization efficiency. The declining trend in fixed asset turnover after 2022 and the modest reduction in total asset turnover from their respective peaks may reflect such changes, warranting further detailed analysis to determine the underlying causes.