Carpenter Technology Corporation (CRS)

The liquidity ratios of Carpenter Technology Corporation from September 2020 through June 2025 reveal an overall trend of gradual decline in the company's short-term liquidity, followed by periods of stabilization and modest improvement.

Starting with a strong current ratio of approximately 4.49 at September 2020, the company demonstrated a solid ability to meet its short-term obligations, with the ratio remaining above 4 until the end of 2021. Over the subsequent period, the current ratio decreased notably, reaching a low of 2.21 by March 2022. This decline suggests a reduction in the firm's liquidity cushion, potentially indicating increased current liabilities or decreased current assets relative to liabilities. However, from this trough, the current ratio displayed a pattern of recovery, rising back to approximately 3.84 by September 2024 and stabilizing around 3.65 to 3.75 through mid-2025. These values indicate the company maintains a comfortable buffer of current assets over current liabilities, albeit at levels lower than those observed in the initial period.

The quick ratio, which excludes inventory from current assets, followed a similar downward trajectory during the initial phases, declining from about 1.77 in September 2020 to a low of approximately 0.90 in December 2022. The ratio remained below 1.0 through much of 2022 and into early 2023, suggesting that the company's most liquid assets excluding inventory were just sufficient or slightly insufficient to cover current liabilities. Nonetheless, beginning in mid-2023, the quick ratio showed signs of improvement, reaching upward of 1.84 by June 2025. This trend indicates that the company's most liquid assets are increasingly adequate to meet short-term obligations, reflecting either improved cash collection, better management of receivables, or reductions in short-term liabilities.

The cash ratio, which considers only cash and cash equivalents, depicted more volatility and a persistent decline initially, from 0.83 in September 2020 to a low of 0.03 in December 2022. Post-2022, the ratio demonstrated a recovery, rising to approximately 0.65 by June 2025. Despite this improvement, the cash ratio remains below 1.0, underscoring that the firm relies on a broader base of liquid assets beyond cash and cash equivalents to cover immediate liabilities.

In summary, Carpenter Technology Corporation's liquidity ratios historically indicated a strong liquidity position in 2020, which experienced a decline through 2022, reflecting potential shifts in working capital management or operational changes. The subsequent recovery in 2023 and 2024 suggests enhanced liquidity management or improved cash flow generation. Nonetheless, the ratios remain below the initial peak levels, and the persistent low or below 1.0 cash ratio underscores reliance on non-cash liquid assets to meet immediate financial obligations.

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Additional liquidity measure

The analysis of Carpenter Technology Corporation’s cash conversion cycle (CCC) over the period from September 2020 to June 2025 reveals notable fluctuations and an overall upward trend. Initially, the CCC stood at approximately 158.53 days as of September 30, 2020. During the subsequent quarter, it decreased to 154.11 days, indicating a slight improvement in working capital efficiency. However, this was followed by a substantial increase to 169.47 days by March 31, 2021, suggesting a deterioration in the company's ability to convert investments in inventory and receivables into cash efficiently.

From mid-2021 onward, the CCC generally demonstrated a decreasing trend, reaching a low of approximately 130.95 days as of June 30, 2022. This decline signifies improved operational efficiency, potentially driven by better inventory management, receivables collection, or payables practices. The period between June 2022 and September 2022 saw an uptick to 139.05 days, but subsequent data indicate a resurgence in CCC levels, with values returning to around 154.33 days by the end of 2022.

Throughout 2023, the CCC remained relatively elevated, fluctuating around the high 140s to low 150s days, culminating in a slight increase to 156.23 days by March 2024. This indicates some challenges in maintaining the efficiency gains achieved earlier. The second quarter of 2024 saw a modest decline to 153.74 days, but the third quarter reverted to approximately 153.14 days, suggesting stability within a certain range.

Forecasted data into 2025 shows an upward trajectory, with the CCC reaching approximately 164.13 days by June 2025. This increase points to a potential slowdown in cash conversion efficiency, which could be attributable to factors such as longer receivables collection periods, increased inventory holdings, or extended payables cycles.

Overall, the company's CCC has experienced oscillations with an overall trend toward lengthening in recent periods, indicating that cash conversion efficiency has somewhat declined from earlier, more favorable levels. This pattern warrants further analysis of underlying operational components to identify specific drivers affecting the cash conversion cycle dynamics.