Coherent Inc (COHR)

The liquidity ratios of Coherent Inc. over the specified period demonstrate notable trends and fluctuations in the company's short-term financial health.

Current Ratio: This ratio, measuring the company's ability to cover its current liabilities with its current assets, shows an overall upward trend from September 2020 (3.09) to a peak in March 2021 (4.26). Following this peak, there was a decline to 2.00 by December 2021, and fluctuations continue thereafter, with values oscillating between approximately 2.71 and 4.15 up to June 2021. From this point onward, the ratio mostly remains within a range of roughly 2.47 to 3.09, indicating relatively stable short-term liquidity with slight downward adjustments over subsequent years.

Quick Ratio: This ratio, which excludes inventories and therefore offers a more conservative view of liquidity, initially rose sharply from 1.14 in September 2020 to 3.19 in March 2021. Subsequently, it declined sharply to 1.07 by March 2022, then increased again to levels around 1.60 through September 2023. Notably, a significant anomaly appears in September 2024, where the ratio spikes unexpectedly to approximately 604.37, suggesting either a data inconsistency or a rare circumstance affecting the calculation. Overall, after the initial fluctuation, the ratio generally remains within a range of about 1.04 to 1.63, which indicates that Coherent typically maintains a comfortable buffer of liquid assets over current liabilities, excluding inventories.

Cash Ratio: This highly conservative liquidity measure displays a variable pattern, starting at 0.79 in September 2020, then increasing to 2.28 in March 2021, reflecting improved immediate liquidity. Afterward, the ratio generally hovers between 0.69 and 1.31 through December 2021, with periodic fluctuations. From early 2022 onward, the ratio stabilizes around the 0.70 to 0.87 range, indicating a consistent capacity to meet short-term obligations with cash and cash equivalents. A notable anomaly occurs in September 2024, when the ratio again sharply rises—reaching approximately 604.37—this likely indicates an anomaly or data error, given its divergence from trend.

Summary: Overall, Coherent's liquidity ratios suggest a company with robust liquidity positions during the early period, especially as seen in the high current and quick ratios in 2020-2021. These ratios indicate the ability to meet short-term obligations comfortably, with some decline and stabilization over subsequent periods. The persistent high current ratio reflects substantial current assets relative to liabilities, while the quick and cash ratios confirm the company's capacity to cover immediate liabilities without relying on inventory liquidation. Anomalous spikes in the quick and cash ratios during September 2024 should be interpreted cautiously, likely owing to data irregularities rather than actual liquidity surges.

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Additional liquidity measure

The analysis of the Coherent Inc. cash conversion cycle (CCC) over the specified periods illustrates significant fluctuations, reflecting underlying changes in the company's operational efficiency and working capital management.

From September 30, 2020, to December 31, 2020, the CCC increased markedly from approximately 107.54 days to 157.35 days, indicating a slowdown in the company's cash conversion processes. This upward trend continued into March 31, 2021 (151.80 days) and June 30, 2021 (154.18 days), with the cycle reaching a peak of 161.22 days in September 2021. Such increases generally suggest longer periods for receivables collection, inventory holding, or both, consequently impairing liquidity and working capital efficiency.

During the latter part of 2021 and into 2022, the CCC showed some reduction but remained elevated, reaching around 169.06 days in March 2022 and fluctuating slightly afterward. Notably, by September 2022, the CCC experienced a significant escalation to approximately 220.62 days, highlighting a pronounced decline in operational efficiency or changes unfavorable to working capital management.

Following this peak, a downward trend initiated, with the CCC decreasing to about 195.85 days by December 2022 and further reducing to 178.38 days by March 2023. This decline continued into mid-2023, with the cycle reaching 153.12 days in June and further decreasing to approximately 149.28 days in September 2023, demonstrating a consistent improvement in managing receivables, inventories, and payables.

However, the data exhibits an anomalous and extraordinary spike on September 30, 2024, with the CCC reaching approximately 59,882.78 days. This figure appears to be an outlier or data error, given its implausibility within typical operational contexts. Subsequent periods see the CCC reverting to more typical levels, around 128.87 days in December 2024 and stabilizing near 127.03 to 137.99 days into 2025.

In summary, over the analyzed timeframe, Coherent Inc. experienced periods of rising CCC, notably reaching peak inefficiency in late 2022, followed by a consistent trend toward operational improvement during 2023 and into 2025. The substantial outlier in September 2024 likely represents a data anomaly and should be interpreted with caution. The overall trend suggests strategic efforts to optimize working capital utilization, although periods of inefficiency had adverse effects during certain intervals.