Allegion PLC (ALLE)

Short-term

Turnover ratios

Allegion plc's activity ratios provide insights into how efficiently the company is managing its resources in relation to sales and operating activities.

1. Inventory Turnover:
Allegion's inventory turnover has shown a moderate fluctuation over the past five years, ranging from 4.07 to 5.93 times a year. In 2023, it stands at 4.72 times, indicating that Allegion is able to sell and replace its inventory approximately 4.72 times a year. A higher inventory turnover ratio suggests efficient inventory management and liquidity.

2. Receivables Turnover:
Allegion's receivables turnover has also shown stability over the years, with the ratio varying from 8.27 to 10.12 times. A higher receivables turnover ratio, as seen in 2021, indicates that Allegion is collecting its receivables quickly. In 2023, the ratio is 8.84 times, which implies that the company is efficient in collecting payments from customers.

3. Payables Turnover:
Allegion's payables turnover has ranged from 6.42 to 7.98 times in the last five years. The company is able to pay its suppliers approximately 7.98 times a year in 2023, showing a quicker payment cycle. A high payables turnover ratio suggests that Allegion is managing its payables efficiently.

4. Working Capital Turnover:
Allegion's working capital turnover has shown an increasing trend over the years, indicating an improvement in how effectively the company is using its working capital to generate revenue. In 2023, the working capital turnover ratio is at 12.98 times, which signifies that Allegion is generating revenue approximately 12.98 times for every dollar of working capital employed.

Overall, Allegion's activity ratios reflect effective management of inventory, receivables, payables, and working capital, indicating operational efficiency and financial health.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate sales. Let's analyze the activity ratios of Allegion plc based on the provided data.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows an increase from 61.51 days in 2019 to 77.35 days in 2023.
- This indicates that Allegion is holding onto its inventory for a longer period, which could tie up capital and increase the risk of obsolescence.
- A high DOH may also suggest potential inefficiencies in inventory management or a slow turnover of goods.

2. Days of Sales Outstanding (DSO):
- DSO measures the average number of days it takes for a company to collect payment after making a sale.
- Allegion's DSO has fluctuated over the years, with a decrease from 42.18 days in 2019 to 41.27 days in 2023.
- A lower DSO is generally favorable as it indicates faster collections and better cash flow management.

3. Number of Days of Payables:
- This ratio reflects how long on average it takes a company to pay its suppliers.
- Allegion's days of payables have fluctuated, with a decrease from 50.36 days in 2019 to 45.72 days in 2023.
- A lower number of days of payables may indicate that Allegion is paying its suppliers more quickly, which could impact cash flows and relationships with suppliers.

Overall, the analysis of Allegion's activity ratios suggests that the company may be facing challenges in managing its inventory efficiently and paying suppliers promptly. However, improvements in days of sales outstanding indicate strengths in collections management. It is essential for Allegion to continue monitoring and optimizing these activity ratios to enhance operational efficiency and financial performance.

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Long-term

The fixed asset turnover ratio measures how efficiently a company generates sales from its fixed assets. Over the past five years, Allegion plc's fixed asset turnover has remained relatively stable, ranging from 9.22 to 10.60. This indicates that the company is effectively utilizing its fixed assets to generate sales, with a high turnover rate consistently above 9.

On the other hand, the total asset turnover ratio reflects Allegion plc's ability to generate revenue from all of its assets, not just fixed assets. The company's total asset turnover has fluctuated between 0.82 and 0.96 over the same period, with a decreasing trend in recent years. A total asset turnover ratio below 1 suggests that Allegion plc may have a large investment in assets relative to its sales revenue.

Overall, Allegion plc's fixed asset turnover ratio indicates efficiency in utilizing fixed assets to generate sales, while the declining trend in total asset turnover warrants further investigation into the company's overall asset management and sales generation strategies. Further analysis of the factors driving these ratios, such as changes in sales volume, asset base, or operational efficiency, would provide more insights into Allegion plc's long-term activity performance.