Align Technology Inc (ALGN)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.89 | 3.25 | 4.42 | 5.09 | 5.92 |
| Receivables turnover | 3.69 | 3.73 | 4.41 | 3.73 | 4.01 |
| Payables turnover | 10.21 | 8.61 | 6.21 | 4.99 | 7.60 |
| Working capital turnover | 10.16 | 7.49 | 6.93 | 4.72 | 3.63 |
The trend analysis of Align Technology, Inc.'s activity ratios over the past five years reveals insights into the company's operational efficiency.
Inventory turnover has been fluctuating over the period, indicating changes in the company's ability to manage its inventory levels efficiently. The decrease in inventory turnover from 2019 to 2023 suggests a potential increase in inventory holding costs or difficulties in selling existing inventory.
Receivables turnover has also shown variation year on year, suggesting changes in the company's credit policies or the effectiveness of its collection efforts. The decrease in receivables turnover in 2020 followed by an increase in subsequent years could indicate potential changes in customer payment behaviors.
Payables turnover has increased steadily from 2019 to 2023, reflecting the company's ability to manage its trade payables effectively. A higher payables turnover ratio indicates that the company is taking longer to pay its suppliers, which can help improve cash flow and liquidity.
Working capital turnover has been on an upward trend, indicating that Align Technology, Inc. is generating more revenue for each dollar of working capital invested. This suggests improved operational efficiency and better utilization of resources over the years.
Overall, while there have been fluctuations in some activity ratios, the increasing trend in working capital turnover and payables turnover suggests that Align Technology, Inc. has been effectively managing its working capital and supplier payments to enhance operational efficiency in recent years.
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 | 93.79 | 112.32 | 82.61 | 71.71 | 61.70 |
| Days of sales outstanding (DSO) | days | 98.96 | 97.75 | 82.85 | 97.91 | 90.98 |
| Number of days of payables | days | 35.74 | 42.40 | 58.81 | 73.20 | 48.04 |
Analyzing Align Technology, Inc.'s activity ratios over the past five years provides insights into the efficiency of the company's operations.
1. Days of Inventory on Hand (DOH):
- Align Technology's DOH has shown fluctuations over the years, ranging from a low of 61.70 days in 2019 to a high of 112.32 days in 2022.
- The company managed its inventory more efficiently in 2019 and 2021 compared to 2020 and 2022, as indicated by the lower DOH.
- In 2023, the DOH decreased to 93.79 days, suggesting better inventory management compared to 2022 but still higher than the levels seen in 2019 and 2021.
2. Days of Sales Outstanding (DSO):
- Align Technology's DSO varied over the years, with a peak of 106.89 days in 2020 and a low of 82.85 days in 2021.
- The company improved its collection process in 2021, leading to a decrease in DSO compared to 2020 and 2022.
- In 2023, the DSO slightly increased to 85.38 days, indicating a longer time taken to collect receivables compared to 2021 and 2022.
3. Number of Days of Payables:
- Align Technology's days of payables also showed variation, with the lowest level of 35.74 days in 2023 and the highest of 73.20 days in 2020.
- The company reduced its payment period in 2023 compared to the previous years, suggesting a more efficient management of payables.
- Align Technology improved its payables turnover by decreasing the number of days of payables in 2023, which can have a positive impact on cash flow and working capital management.
Overall, while there have been fluctuations in Align Technology's activity ratios over the years, the company appears to have made progress in managing its inventory, receivables, and payables more efficiently in 2023. Maintaining a balance between these activity ratios is crucial for optimizing working capital and enhancing overall operational performance.
See also:
Align Technology Inc Short-term (Operating) Activity Ratios
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.99 | 3.03 | 3.65 | 3.36 | 3.81 |
| Total asset turnover | 0.63 | 0.63 | 0.67 | 0.51 | 0.96 |
The long-term activity ratios of Align Technology, Inc. indicate how efficiently the company is utilizing its assets to generate sales over the long term.
1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how well a company utilizes its fixed assets to generate revenue.
- Align Technology's fixed asset turnover has shown a slight decrease over the years from 3.81 in 2019 to 2.99 in 2023. This decline may indicate a decrease in the company's ability to generate revenue from its fixed assets.
- Despite the decrease, the company still maintains a relatively high fixed asset turnover ratio compared to industry benchmarks, suggesting efficient utilization of fixed assets to generate sales.
2. Total Asset Turnover:
- The total asset turnover ratio evaluates how efficiently a company uses all its assets to generate revenue.
- Align Technology's total asset turnover has remained relatively stable around 0.63 to 0.67 from 2020 to 2023. This indicates that the company has been consistent in generating sales from its total assets during these years.
- The total asset turnover ratio of Align Technology is lower compared to the industry average, suggesting that the company may have a higher investment in assets relative to its sales.
In conclusion, while Align Technology has maintained stable total asset turnover, there has been a slight decline in its fixed asset turnover over the years. The company may need to focus on optimizing the utilization of its fixed assets to improve its long-term operational efficiency.