Carpenter Technology Corporation (CRS)

Short-term

Turnover ratios

The provided activity ratios for Carpenter Technology Corporation reflect a nuanced view of the company's operational efficiency concerning inventory management, receivables collection, payables settlement, and working capital utilization over the analyzed periods.

Inventory Turnover: The ratio demonstrates fluctuations within a generally moderate range, indicating varying efficiency in inventory management. Starting at 2.68 times as of September 2020, it reached a peak of 3.46 during June 2021 and again in June 2024, and a trough of approximately 2.63 in March 2025. The increases suggest periods where inventory was converted into sales more rapidly, possibly reflecting better inventory control or higher sales activity. Conversely, declines may indicate slower inventory turnover, potentially caused by overstocking, supply chain disruptions, or reduced sales velocity.

Receivables Turnover: This ratio indicates the company's effectiveness in collecting accounts receivable. Beginning at 7.78 in September 2020, the turnover declined significantly to around 4.78 by June 2021, suggesting a lengthening in the collection period. Subsequently, the ratio generally increased, reaching over 5.36 in December 2023, implying improved collection efficiency. The overall trend shows initial deterioration followed by recovery, which could reflect adjustments in credit policies or improved collection efforts.

Payables Turnover: The ratio here highlights the company's payment behavior toward suppliers. Early periods exhibit high turnover at around 14.88 times (September 2020), indicating shorter payment periods. A declining trend to approximately 6.22 during September 2022 signals lengthening of payables, potentially as a strategic approach to conserve cash. From late 2022 onward, the ratio rises again toward 8.40 by March 2025, indicating a tendency to settle payables more promptly in recent periods.

Working Capital Turnover: This ratio demonstrates the efficiency of utilizing working capital to generate revenue. The ratio consistently increased from about 2.11 in September 2020 to approximately 3.10 in June 2023, suggesting enhanced efficiency in leveraging working capital for sales generation. Post June 2023, the ratio stabilized or declined slightly, ending around 2.25 by June 2025. The declining trend may reflect either a deliberate reduction in working capital investment or operational adjustments, possibly influenced by inventory and receivables management strategies.

In summary, Carpenter Technology Corporation has experienced periods of both improved and diminished operational efficiency across these key activity ratios. The inventory turnover trend indicates generally moderate management of inventory, with temporary peaks. The receivables turnover shows an initial slowdown followed by recovery, emphasizing enhanced collection efforts. The payables turnover suggests strategic extension of payment periods initially, then a move towards earlier settlement, possibly to strengthen supplier relationships. The working capital turnover trend indicates increased efficiency in asset utilization over time, with recent stabilization or slight reduction. These insights collectively reflect a company adapting its operational practices to market conditions, supply chain dynamics, and strategic priorities.

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Average number of days

The activity ratios for Carpenter Technology Corporation reveal significant insights into the company's operational efficiency over the analyzed period.

Days of Inventory on Hand (DOH):
The DOH fluctuated within a range approximately between 105 and 137 days. Notably, there was a downward trend observed from September 2020 through June 2021, where the DOH decreased from roughly 136 days to about 105 days, indicating improved inventory management and faster turnover during this period. Conversely, the DOH increased again from mid-2021 onward, reaching about 137 days in December 2023, suggesting a buildup in inventory or potential inefficiencies in inventory reduction. The slightly lower levels in mid-2023, around 105 days, point to periods of improved inventory turnover, but overall, the ratio remained relatively high, implying a relatively lengthy inventory cycle compared to industry standards.

Days of Sales Outstanding (DSO):
The DSO varied between approximately 46 and 80 days. There was an increase from approximately 47 days in September 2020 to over 79 days in March 2023, indicating customers were taking longer to settle accounts receivable over this period. Post-March 2023, the DSO decreased back to roughly 69 days in September 2023 and stabilized around 73 to 75 days in the subsequent periods, suggesting a slight improvement in collection efficiency or adjustments in credit policies. Overall, the rising trend between 2020 and early 2023 reflects extended credit periods, but the subsequent stabilization indicates efforts to contain receivable collection cycles.

Number of Days of Payables:
The payable days fluctuated between approximately 25 and 58 days. Initially, the ratio was around 25 days in late 2020, then increased significantly to over 52 days by the end of 2021, demonstrating an extension in the period the company takes to pay suppliers. From 2022 onward, the ratio generally stabilized around the 45–50 day mark, with occasional slight decreases, suggesting a balancing act between extending payables to optimize working capital and maintaining good supplier relations.

Overall Implications:
The analysis reveals that Carpenter Technology has experienced periods of inventory accumulation and extended receivables, which can influence liquidity and working capital management. Periodic improvements, such as reduced DOH and DSO around mid-2023 and 2024, point to efforts to enhance operational efficiency. Maintaining a balanced leverage of inventory, receivables, and payables is crucial for optimizing cash flows and operational agility, especially given the fluctuations observed over the analyzed timeframe.

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Long-term

The analysis of Carpenter Technology Corporation's long-term activity ratios reveals several trends over the specified periods. The fixed asset turnover ratio demonstrates a consistent upward trajectory, starting from 1.46 as of September 30, 2020, and gradually increasing to reach 2.18 by March 31, 2025. This indicates an improvement in the efficiency of utilizing fixed assets to generate sales, suggesting either enhanced asset management or increased operational productivity.

Similarly, the total asset turnover ratio exhibits an overall positive trend, rising from 0.62 at September 30, 2020, to 0.87 by March 31, 2023, maintaining a relatively stable level through subsequent periods. This ratio's steady increase reflects heightened overall efficiency in using total assets to produce revenue, possibly due to better asset allocation, operational efficiencies, or increased sales volume relative to asset base.

The data shows more pronounced growth in fixed asset turnover compared to total asset turnover, implying that the company may have optimized or restructured its fixed asset base for higher productivity. The sustained improvements in both ratios suggest ongoing efforts to enhance asset utilization, which contribute positively to long-term operational efficiency and financial performance.

In summary, Carpenter Technology Corporation has demonstrated significant and consistent improvements in its long-term activity ratios, reflecting greater efficiency in asset utilization over the analyzed periods. Such trends are indicative of effective asset management strategies and potentially favorable operational developments aimed at maximizing the productivity of both fixed and total assets.