AZZ Incorporated (AZZ)

Short-term

Turnover ratios

The activity ratios of AZZ Incorporated provide insights into the efficiency and effectiveness of the company's operational processes.

1. Inventory turnover: This ratio indicates how many times a company sells and replaces its inventory within a specific period. AZZ's inventory turnover has been increasing steadily over the past five years, reaching 9.98 in 2024. This suggests that the company is managing its inventory more efficiently, turning over its inventory almost 10 times in the most recent year.

2. Receivables turnover: The receivables turnover ratio measures how efficiently a company is collecting cash from its credit sales. AZZ's receivables turnover has also shown an upward trend, reaching 9.74 in 2024. This indicates that AZZ is collecting its receivables at a faster rate, which is a positive sign of effective credit management.

3. Payables turnover: This ratio evaluates how quickly a company pays its suppliers. AZZ's payables turnover has fluctuated over the years but remained relatively high, implying that the company is managing its payables effectively. In 2024, the payables turnover was 13.34, indicating that AZZ is paying its suppliers around 13 times a year.

4. Working capital turnover: The working capital turnover ratio measures how efficiently a company is using its working capital to generate sales revenue. AZZ's working capital turnover has decreased over the years, indicating a decline in the efficiency of utilizing working capital to generate revenue. In 2024, the working capital turnover was 8.90, still showing effectiveness in utilizing working capital.

Overall, based on the activity ratios, AZZ Incorporated appears to be managing its inventory, receivables, and payables efficiently, resulting in improved operational performance and financial health over the years. However, the declining trend in working capital turnover may indicate a need for the company to reassess its working capital management strategies to enhance overall efficiency.

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Average number of days

The activity ratios of AZZ Incorporated, specifically the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables, provide insights into the efficiency of the company's operations and management of working capital.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows fluctuations over the past five years, ranging from a low of 36.58 days to a high of 121.30 days.
- A decreasing DOH indicates that the company is managing its inventory more efficiently, potentially leading to lower carrying costs and better inventory turnover.
- In 2022, the significant increase in DOH to 121.30 days may suggest issues with inventory management, such as overstocking or slow-moving inventory.
- The decrease in DOH in 2024 compared to the previous year indicates an improvement in inventory management efficiency.

2. Days of Sales Outstanding (DSO):
- The DSO for AZZ Incorporated also fluctuates, with the values ranging from 37.47 days to 115.98 days over the five-year period.
- A lower DSO indicates that the company is collecting receivables more quickly, improving cash flow and liquidity.
- The spike in DSO in 2022 to 115.98 days might indicate challenges in collecting receivables promptly, potentially impacting cash flow and working capital management.
- The decreasing trend in DSO over the past two years implies that the company has been able to improve its credit control and collection efforts.

3. Number of Days of Payables:
- The number of days of payables has varied between 23.89 days and 42.39 days over the five-year period.
- A longer period of payables suggests that the company is taking more time to pay its suppliers, which can help improve cash flow.
- The increase in payables days in 2023 compared to 2022 indicates a potential shift in the company's payment terms with suppliers.
- The decrease in payables days in 2024 could signify a move towards more prompt payment to suppliers or renegotiated terms.

In summary, analyzing these activity ratios reveals important aspects of AZZ Incorporated's operational efficiency and working capital management. The company's ability to optimize inventory levels, timely collect receivables, and manage payables can significantly impact its financial performance and overall liquidity.

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Long-term

AZZ Incorporated's long-term activity ratios provide valuable insights into the company's efficiency in managing its fixed and total assets over the years.

The fixed asset turnover ratio has shown some fluctuation over the past five years, ranging from 2.32 in 2021 to 2.84 in 2024. This ratio indicates that, on average, AZZ Incorporated generates revenue of approximately 2.32 to 2.84 times from its fixed assets investment. The company's efficiency in utilizing its fixed assets has improved overall, as seen by the increasing trend in the ratio, with the latest figure suggesting better utilization compared to the previous years.

On the other hand, the total asset turnover ratio has exhibited a more significant variation, ranging from 0.46 in 2022 to 0.70 in 2024. This ratio indicates that, on average, AZZ Incorporated generated revenue equivalent to approximately 0.46 to 0.70 times its total asset base during these years. The lower ratios in 2022 and 2023 might imply that the company faced challenges in generating sufficient revenue relative to its investment in total assets, while the improvement in 2024 signals an enhancement in asset utilization efficiency.

Overall, the analysis of AZZ Incorporated's long-term activity ratios suggests that while the company has shown improvements in utilizing its fixed assets more efficiently, there have been fluctuations in its ability to generate revenue from its total asset base over the past five years. Continued monitoring of these ratios will be crucial to assess the company's ongoing performance and efficiency in managing its asset base.