Archrock Inc (AROC)

Inventory turnover

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Cost of revenue (ttm)	US$ in thousands	618,971	601,693	585,320	577,879	574,333	570,786	567,702	565,518	545,568	527,072	510,129	488,070	480,287	479,324	465,974	526,308	663,472	560,341	607,701	584,343
Inventory	US$ in thousands	89,686	84,366	79,233	80,358	81,761	87,942	93,128	89,632	84,622	84,091	77,636	73,596	72,869	66,630	65,885	66,024	63,670	65,311	70,991	72,931
Inventory turnover		6.90	7.13	7.39	7.19	7.02	6.49	6.10	6.31	6.45	6.27	6.57	6.63	6.59	7.19	7.07	7.97	10.42	8.58	8.56	8.01

December 31, 2024 calculation

Inventory turnover = Cost of revenue (ttm) ÷ Inventory
= $618,971K ÷ $89,686K
= 6.90

Archrock Inc's inventory turnover ratio measures the efficiency with which the company manages its inventory. A higher turnover ratio indicates that the company is selling its inventory quickly, which is generally preferable as it reduces holding costs and minimizes the risk of obsolescence.

Based on the provided data:
- The inventory turnover ratio fluctuated over the periods, starting at 8.01 on March 31, 2020, peaking at 10.42 on December 31, 2020, and then experiencing a gradual decline.
- The ratio decreased from a high of 10.42 on December 31, 2020, to a low of 6.10 on June 30, 2023, before slightly recovering.
- The most recent inventory turnover ratio stood at 6.90 on December 31, 2024, indicating a moderate level of inventory turnover.

A declining inventory turnover ratio may suggest potential issues such as overstocking, slow-moving inventory, or weakening demand for the company's products. It is crucial for Archrock Inc to analyze the reasons behind the decreasing turnover ratio and take appropriate actions to optimize its inventory management practices. Further investigation into the company's sales trends, supply chain efficiency, and demand forecasting could provide insights for improving inventory turnover in the future.