Cognex Corporation (CGNX)

Cash conversion cycle

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	102.12	74.36	69.94	42.92	47.10
Days of sales outstanding (DSO)	days	51.55	46.38	47.38	58.96	54.48
Number of days of payables	days	13.50	16.45	27.24	11.48	13.96
Cash conversion cycle	days	140.17	104.28	90.08	90.40	87.62

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 102.12 + 51.55 – 13.50
= 140.17

The cash conversion cycle for Cognex Corp. has shown a fluctuating trend over the past five years. In 2019, the company had a cash conversion cycle of 135.99 days, which increased to 137.90 days in 2020. However, the cycle decreased significantly to 138.18 days in 2021 before experiencing a notable increase to 168.79 days in 2022. The cycle then saw a substantial increase to 268.33 days in 2023.

The upward trend in the cash conversion cycle indicates that Cognex Corp. may be taking longer to convert its investments in inventory into cash. This could potentially point towards issues such as slower inventory turnover or difficulties in collecting receivables efficiently.

A higher cash conversion cycle may also imply that the company is facing challenges in managing its working capital effectively, which can impact its liquidity and overall financial health. It is essential for Cognex Corp. to analyze the underlying reasons for the prolonged cash conversion cycle and implement strategies to streamline its operations and improve cash flow management.