Topbuild Corp (BLD)
Cash conversion cycle
| 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 32.00 | 31.12 | 31.49 | 30.67 | 29.82 | 29.44 | 31.86 | 35.04 | 36.91 | 38.67 | 40.91 | 40.97 | 41.48 | 26.77 | 24.75 | 24.03 | 24.28 | 21.82 | 22.50 | 23.15 |
| Days of sales outstanding (DSO) | days | 51.64 | 57.37 | 60.34 | 58.96 | 56.95 | 62.33 | 61.64 | 60.38 | 61.63 | 62.57 | 65.50 | 69.20 | 70.84 | 60.61 | 60.58 | 60.96 | 57.92 | 60.50 | 58.99 | 59.91 |
| Number of days of payables | days | 35.91 | 36.62 | 36.88 | 38.26 | 38.39 | 37.57 | 38.77 | 37.43 | 40.98 | 44.13 | 48.22 | 49.78 | 54.31 | 50.75 | 49.42 | 48.47 | 49.90 | 47.72 | 44.78 | 46.32 |
| Cash conversion cycle | days | 47.73 | 51.87 | 54.95 | 51.37 | 48.38 | 54.20 | 54.72 | 58.00 | 57.55 | 57.12 | 58.18 | 60.40 | 58.01 | 36.64 | 35.91 | 36.52 | 32.30 | 34.60 | 36.71 | 36.73 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 32.00 + 51.64 – 35.91
= 47.73
The cash conversion cycle is a key metric that measures how long it takes for a company to convert its investments in inventory and accounts receivable into cash flows from sales. For Topbuild Corp, the cash conversion cycle has shown some fluctuations over the years.
From March 31, 2020, to June 30, 2022, the cash conversion cycle remained relatively stable, ranging from around 32 to 36 days. However, starting from December 31, 2022, there was a noticeable increase in the cash conversion cycle, peaking at 60.40 days on March 31, 2022. This significant increase indicates that the company may be taking longer to convert its investments into cash during this period.
Subsequently, there was a slight decline in the cash conversion cycle from June 30, 2022, to September 30, 2024, where it ranged from around 47 to 58 days. Overall, the trend suggests that Topbuild Corp experienced some challenges in efficiently managing its working capital during the later period of the data.
Analyzing the cash conversion cycle over time can provide insights into the company's operational efficiency, inventory management, and collection of receivables. A longer cash conversion cycle may indicate inefficiencies in the company's operations and potential liquidity issues. In contrast, a shorter cycle implies a more effective management of working capital and quicker conversion of assets into cash.
As an analyst, it would be important to further investigate the reasons behind the fluctuations in the cash conversion cycle for Topbuild Corp and assess how the company's management is addressing any challenges identified in order to improve its cash flow efficiency.