Commercial Metals Company (CMC)

Short-term

Turnover ratios

Inventory turnover, which measures how efficiently a company manages its inventory, has improved over the past two years, with a notable increase from 6.01 in 2021 to 6.75 in 2023. This indicates that Commercial Metals Co. is selling its inventory at a faster rate.

The receivables turnover ratio has also shown improvement, indicating that the company is collecting its receivables more efficiently. The ratio increased from 6.09 in 2021 to 7.10 in 2023, reflecting faster collection of receivables.

The payables turnover ratio has also seen notable growth, from 12.48 in 2021 to 19.18 in 2023, suggesting that the company is paying its suppliers at a faster rate.

The working capital turnover ratio has fluctuated over the past five years, but remains within a relatively stable range. It decreased slightly from 4.28 in 2022 to 3.83 in 2023, indicating a decrease in the efficiency of working capital utilization.

Overall, the activity ratios indicate improved efficiency in managing inventory, collecting receivables, and paying suppliers, although there has been a slight decrease in working capital turnover.

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Average number of days

The activity ratios for Commercial Metals Co. provide insight into its inventory management, accounts receivable collection, and accounts payable turnover over the past five years.

First, looking at the Days of Inventory on Hand (DOH), we can see a slight decrease from 60.71 days in 2021 to 54.09 days in 2023. This suggests an improvement in the company's ability to sell through its inventory, potentially resulting in lower carrying costs and better cash flow.

Next, focusing on the Days of Sales Outstanding (DSO), we observe a consistent decrease from 63.63 days in 2019 to 51.44 days in 2023. This indicates that Commercial Metals Co. has been more efficient in collecting payments from its customers, resulting in a shorter accounts receivable turnover cycle and potentially improved liquidity.

In terms of the Number of Days of Payables, there has been a fluctuation over the years, with a noticeable decrease in 2023 compared to the previous year. It dropped from 22.14 days in 2022 to 19.03 days in 2023, indicating that the company has been able to manage and settle its payables more efficiently.

Overall, the trends in these activity ratios suggest that Commercial Metals Co. has made notable improvements in its inventory management, accounts receivable collection, and accounts payable turnover, potentially leading to enhanced operational efficiency and cash flow management.

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Long-term

The fixed asset turnover ratio measures how efficiently a company utilizes its fixed assets to generate sales. Commercial Metals Co. has shown a decrease in its fixed asset turnover ratio over the past five years, from 4.66 in 2022 to 3.65 in 2023. This indicates that the company's fixed assets are generating fewer sales compared to the previous year.

On the other hand, the total asset turnover ratio measures how efficiently a company uses its total assets to generate revenue. Commercial Metals Co. has exhibited a declining trend in total asset turnover ratio, from 1.55 in 2019 to 1.33 in 2023. This suggests a reduction in the company's ability to generate sales relative to its total asset base.

Overall, the declining trend in both fixed asset turnover and total asset turnover ratios indicates that Commercial Metals Co. may be experiencing challenges in effectively utilizing its assets to drive sales growth, which could warrant further investigation into the company's operational and strategic efficiency.