Compass Minerals International Inc (CMP)

Days of inventory on hand (DOH)

		Sep 30, 2023	Sep 30, 2022	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Inventory turnover		0.47	0.66	0.46	0.66	0.74
DOH	days	781.40	556.09	790.04	550.59	490.22

September 30, 2023 calculation

DOH = 365 ÷ Inventory turnover
= 365 ÷ 0.47
= 781.40

Days of Inventory on Hand (DOH) measures the average number of days it takes for a company to sell its inventory. A higher DOH indicates that the company is holding onto its inventory for a longer period, which can tie up working capital and increase the risk of obsolescence.

Looking at the trend in Compass Minerals International Inc's DOH over the past five years, we see a fluctuating pattern. The DOH increased from 81.11 days in 2018 to 98.55 days in 2019, indicating a slower turnover of inventory. This trend continued with a further increase to 138.87 days in 2020, suggesting an even longer holding period for inventory.

However, in 2022 and 2023, there was a significant reduction in DOH to 106.09 days and 147.46 days, respectively. This rise indicates a reversal of the previous trend, with the company taking longer to convert its inventory into sales.

The increase in DOH can imply declining sales or production issues, leading to excess inventory. On the other hand, a lower DOH could indicate more efficient management of inventory, resulting in faster turnover and reduced carrying costs.

It's essential to consider the industry and economic factors while analyzing these changes in DOH. A higher DOH is not always negative; for seasonal or specialized industries, it may be common to hold inventory for longer periods.

In conclusion, the upward trend in Compass Minerals International Inc's DOH between 2018 and 2020 followed by a sudden decline in 2022 and 2023 suggests fluctuations in inventory management. Further analysis of the company's sales patterns, production processes, and industry comparisons would provide valuable insights into the reasons behind these changes.