ChampionX Corporation (CHX)

Short-term

Turnover ratios

The activity ratios of ChampionX Corp. provide insights into its efficiency in managing inventory, receivables, payables, and working capital over the past five years.

1. Inventory Turnover:
- The inventory turnover reflects how many times the company's inventory is sold and replaced during the year.
- The trend shows a relatively consistent increase from 2019 to 2022, which indicates an improvement in managing inventory levels.
- A high inventory turnover ratio suggests that ChampionX is efficiently managing its inventory, potentially reducing carrying costs and minimizing holding risks.

2. Receivables Turnover:
- The receivables turnover ratio measures how many times a company collects its accounts receivable balance over a specific period.
- The increasing trend in receivables turnover from 2019 to 2023 indicates the company's ability to collect from its customers more quickly.
- A high receivables turnover ratio suggests that ChampionX is efficiently managing its credit sales and collection process.

3. Payables Turnover:
- The payables turnover ratio measures how efficiently a company pays its suppliers.
- The decreasing trend in payables turnover from 2019 to 2023 may indicate that ChampionX has been taking longer to pay its suppliers over the years.
- This could be a deliberate strategy to manage cash flow or negotiate better payment terms with suppliers.

4. Working Capital Turnover:
- The working capital turnover ratio shows how effectively a company is generating sales revenue from its working capital.
- The increasing trend in working capital turnover from 2019 to 2023 indicates improved efficiency in utilizing working capital to generate sales.
- A higher working capital turnover ratio signifies that ChampionX is effectively using its current assets to support its operations and sales growth.

Overall, analyzing the activity ratios of ChampionX Corp. provides valuable insights into its operational efficiency and effectiveness in managing key components of working capital.

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Average number of days

The activity ratios of ChampionX Corp. provide insights into the efficiency of the company's operations in managing its inventory, collecting receivables, and paying its suppliers.

1. Days of Inventory on Hand (DOH):
- The days of inventory on hand have shown a fluctuating trend over the past five years, ranging from a low of 68.11 days in 2022 to a high of 105.31 days in 2020.
- A decrease in this ratio indicates that the company is managing its inventory efficiently, while an increase suggests that inventory turnover is slowing down.
- Generally, a lower DOH is favorable as it indicates faster turnover of inventory and better management of stock levels.

2. Days of Sales Outstanding (DSO):
- The days of sales outstanding have also varied over the years, with a low of 51.91 days in 2023 and a high of 107.49 days in 2020.
- A decrease in DSO implies that the company is collecting its accounts receivable more quickly, whereas an increase indicates delayed collections.
- A lower DSO is preferable as it signifies that the company is efficiently managing its receivables and converting credit sales into cash.

3. Number of Days of Payables:
- The number of days of payables have shown fluctuations as well, ranging from 58.22 days in 2019 to 74.13 days in 2021.
- An increase in this ratio suggests that the company is taking longer to pay its suppliers, while a decrease indicates faster payment cycles.
- Extending the payment period may provide the company with additional working capital but could strain supplier relationships if excessive.

In conclusion, analyzing these activity ratios helps assess ChampionX Corp.'s operational efficiency in managing its inventory, receivables, and payables. Monitoring these ratios over time can provide valuable insights into the company's working capital management and operational effectiveness.

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Long-term

ChampionX Corp.'s long-term activity ratios indicate the efficiency with which the company utilizes its assets to generate sales revenue over the years. The fixed asset turnover ratio has shown fluctuations, decreasing in 2021 but improving in 2022 and 2023. This ratio stood at 4.86 in 2023, suggesting that for every dollar invested in fixed assets, the company generated $4.86 in sales, reflecting an efficient use of fixed assets to drive revenue.

In contrast, the total asset turnover ratio has been steadily increasing over the years, reaching 1.16 in 2023. This implies that for every dollar invested in total assets, ChampionX Corp. generated $1.16 in sales revenue. The increasing trend in total asset turnover indicates improved efficiency in utilizing all assets, including fixed and current assets, to drive revenue growth.

Overall, the company has shown improvements in both fixed asset turnover and total asset turnover ratios, reflecting enhanced efficiency in asset utilization to generate sales revenue. The increasing trend in total asset turnover particularly highlights the company's ability to generate more sales from its total asset base, which is a positive sign of operational efficiency and effective asset management.