Carpenter Technology Corporation (CRS)

Short-term

Turnover ratios

Carpenter Technology Corporation's activity ratios provide insight into the efficiency of its operations and management of working capital.

1. Inventory turnover: This ratio indicates how many times Carpenter Technology Corporation sells and replaces its inventory during a specific period. The trend shows a slight decrease from 4.22 in 2021 to 3.57 in 2024, suggesting a potential slowdown in inventory management efficiency.

2. Receivables turnover: This ratio reflects how efficiently Carpenter collects payments from its customers. The consistent range of 4.64 to 7.40 over the years indicates stability in the company's collection processes.

3. Payables turnover: The payables turnover ratio measures how efficiently Carpenter settles its payables with suppliers. The decreasing trend from 17.90 in 2020 to 9.96 in 2024 may signal a slower pace in paying off its obligations.

4. Working capital turnover: This ratio evaluates how effectively Carpenter utilizes its working capital to generate sales. The fluctuating trend reveals variations in the company's working capital management efficiency, with a peak in 2023 and a decline in 2024.

Overall, Carpenter Technology Corporation's activity ratios reflect its efforts in managing inventory, receivables, payables, and working capital to drive operational efficiency and optimize its resources. Analysis of these ratios can help identify areas for improvement and inform strategic decision-making.

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Average number of days

Carpenter Technology Corporation's activity ratios provide insights into the efficiency of the company's operations in managing its inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH):
- The DOH ratio measures how many days, on average, inventory is held before being sold or used.
- The trend for Carpenter Technology Corporation shows fluctuation in the number of days inventory is held over the past five years.
- The increase in DOH from 2020 to 2021 (86.53 days to 118.92 days) indicates that the company was holding inventory for a longer period, which may tie up capital and increase carrying costs.
- However, the subsequent decrease in DOH in 2022 and 2023 (94.10 days to 92.09 days) suggests better inventory management and possibly more efficient production or sales processes.
- The increase in 2024 (102.17 days) indicates a slight decrease in efficiency in managing inventory compared to the previous year.

2. Days of Sales Outstanding (DSO):
- The DSO ratio indicates the average number of days the company takes to collect payment after making a sale.
- Carpenter Technology Corporation's DSO has been relatively consistent over the past five years.
- A higher DSO could suggest slower collection of receivables, which may impact cash flow and working capital management.
- It is worth noting the significant increase in DSO from 2020 to 2021 (49.30 days to 78.72 days), indicating a potential delay in collecting payments during that period.
- The decrease in DSO from 2021 to 2024 (78.72 days to 74.51 days) suggests improved efficiency in collecting receivables in recent years.

3. Number of Days of Payables:
- The number of days of payables ratio indicates the average number of days the company takes to pay its suppliers.
- Carpenter Technology Corporation has shown variability in its payment practices over the last five years.
- The increase in the number of days of payables from 2020 to 2021 (20.39 days to 28.94 days) indicates a longer period taken to settle payables during that period.
- Subsequently, there was a further increase in 2022 and 2023 before a decrease in 2024.
- Managing payables effectively can impact the company's liquidity position, cash flow, and relationships with suppliers.

In summary, analyzing Carpenter Technology Corporation's activity ratios reveals fluctuations in inventory management, consistency in receivables collection efficiency, and variability in payment practices. The company may benefit from optimizing inventory levels and payment terms to enhance operational efficiency and working capital management.

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Long-term

Carpenter Technology Corporation's long-term activity ratios provide insights into the efficiency with which the company generates sales from its fixed assets and total assets over the years. The fixed asset turnover ratio has shown an increasing trend, from 1.44 in 2020 to 2.06 in 2024, indicating that the company has been able to generate more revenue from its investment in fixed assets. This suggests improved efficiency in utilizing its fixed assets to drive sales.

On the other hand, the total asset turnover ratio has fluctuated over the years, with a noticeable increase in 2022 and 2023, followed by a slight decrease in 2024. Although the ratio in 2024 is lower than the peak in 2023, it is still higher compared to the earlier years. This indicates that Carpenter Technology Corporation has been able to generate more revenue relative to its total assets invested, showcasing a trend of improved efficiency in asset utilization.

Overall, the company has shown positive trends in both fixed asset turnover and total asset turnover ratios, suggesting an improvement in operational efficiency and effectiveness in utilizing assets to drive revenue growth over the years.