Allegro Microsystems Inc (ALGM)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company is managing its assets and liabilities. Let's analyze the activity ratios of Allegro Microsystems Inc over the past four years:

1. Inventory Turnover:
Allegro Microsystems Inc's inventory turnover has fluctuated over the years but generally shows an increasing trend. A higher inventory turnover indicates that the company is selling its inventory more quickly, which can lead to lower carrying costs and better liquidity.

2. Receivables Turnover:
The receivables turnover ratio has also shown an increasing trend over the years, indicating that Allegro is collecting its accounts receivable more efficiently. A higher turnover ratio suggests effective management of credit and collection policies.

3. Payables Turnover:
Allegro Microsystems Inc's payables turnover ratio has shown fluctuations but generally demonstrates an increasing trend. A higher payables turnover implies that the company is paying its suppliers more quickly, potentially improving relationships with vendors and managing cash flow efficiently.

4. Working Capital Turnover:
The working capital turnover ratio has been relatively stable over the years, indicating that Allegro is generating revenue efficiently relative to its working capital. A higher working capital turnover ratio suggests that the company is using its working capital efficiently to generate sales.

In summary, Allegro Microsystems Inc has shown improvements in managing its inventory, receivables, and payables over the past four years. These trends suggest that the company is becoming more efficient in utilizing its assets and liabilities to support its operations and generate revenue.

---

Average number of days

The activity ratios provide insights into how efficiently Allegro Microsystems Inc is managing its inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH):
- The days of inventory on hand measure how many days on average a company holds its inventory before selling it.
- In 2024, Allegro Microsystems had 87.88 days of inventory on hand, indicating a decrease compared to the previous year, but still higher than in 2022 and 2021.
- A decreasing trend in DOH suggests better inventory management efficiency and potentially faster inventory turnover, which could free up working capital and reduce carrying costs.

2. Days of Sales Outstanding (DSO):
- The days of sales outstanding represent the average number of days it takes for a company to collect payment after making a sale.
- Allegro Microsystems reduced its DSO from 53.23 days in 2023 to 41.45 days in 2024, indicating improvement in collecting receivables.
- A decreasing DSO suggests effective credit management and faster cash conversion cycle, which can enhance liquidity and cash flow.

3. Number of Days of Payables:
- The number of days of payables shows the average number of days a company takes to pay its suppliers.
- Allegro Microsystems significantly reduced its days of payables from 37.45 days in 2023 to 19.47 days in 2024, reflecting a more efficient payment strategy.
- A lower number of days of payables can indicate better relationships with suppliers or early payment discounts, but it is essential to ensure it does not strain liquidity.

Overall, Allegro Microsystems Inc has shown improvements in managing its inventory turnover, receivables collection, and payables payment efficiency in 2024. These enhancements suggest a more optimized working capital management and potential financial health in the future.

---

Long-term

Allegro Microsystems Inc's long-term activity ratios reveal interesting trends over the past four years. The fixed asset turnover ratio, which measures the efficiency of the company in generating sales from its fixed assets, has shown a slight decrease from 3.70 in 2023 to 3.25 in 2024. This indicates that Allegro Microsystems Inc is generating slightly fewer sales from its fixed assets in the most recent year.

On the other hand, the total asset turnover ratio, which indicates how efficiently the company is utilizing all its assets to generate revenue, has experienced fluctuations over the past four years. It decreased from 0.86 in 2022 to 0.77 in 2021, then increased to 0.82 in 2023 before dropping again to 0.68 in 2024. This suggests that Allegro Microsystems Inc's overall efficiency in generating sales from all its assets has been volatile, with a significant decline in 2024.

In conclusion, while the fixed asset turnover ratio has shown a slight decline, the total asset turnover ratio has been more volatile, indicating fluctuations in Allegro Microsystems Inc's efficiency in generating revenue from its assets over the past four years. Further analysis of the underlying factors contributing to these trends would be beneficial to understand the company's long-term operational performance.