CSW Industrials, Inc. (CSW)

Short-term

Turnover ratios

Analyzing the activity ratios of CSW Industrials, Inc. over the specified period reveals multiple trends and notable fluctuations across key operational efficiency metrics.

Inventory Turnover:
The inventory turnover ratio exhibits a declining trend from September 2020 (3.92) to December 2020 (2.06), indicating a slowdown in inventory liquidation. Subsequently, a gradual recovery is observed, reaching a peak of 2.93 by March 2024. However, post this peak, the ratio slightly diminishes to approximately 2.36 by June 2025. These movements suggest periods of inventory accumulation followed by efforts to enhance inventory management efficiency, though the ratio remains below the initial 2020 levels.

Receivables Turnover:
Receivables turnover demonstrates some variability but generally maintains a stable and upward trend from early 2021 onward. Starting at 5.39 in September 2020, the ratio generally increases, reaching a high point of 7.48 in December 2024 before declining slightly to 5.57 by June 2025. The improved turnover ratio over time indicates an enhancement in receivables collection efficiency, reducing the time outstanding on customer accounts.

Payables Turnover:
The payables turnover ratio shows a decreasing pattern from September 2020 (9.85) to its lowest point in September 2024 (7.30), reflecting slower settlement of obligations to suppliers. Notably, the ratio rises again in December 2024 (8.96) and maintains a relatively stable level through June 2025, suggesting periods of extended payable periods interspersed with normalization.

Working Capital Turnover:
This ratio largely increases from 3.22 in September 2020 to a consistent range around 3.4 to 3.9 through March 2024, implying improved working capital utilization efficiency. However, in the period from September 2024 onward, a marked decline is observed, with the ratio dropping sharply to 1.87 in September 2024 before rebounding somewhat to over 3.1 by June 2025. The decline indicates a period of reduced operational efficiency or increased working capital tied up in operations prior to recovery.

Summary of Trends:
- The inventory turnover ratio experienced a decline early in the period, followed by a modest recovery, with some stabilization in recent periods.
- Receivables turnover improved notably over the period, indicating enhanced collection efficiency.
- Payables turnover decreased initially, suggesting longer payment periods, but later recovered, indicating a possible strategic shift or improved cash flow management.
- Working capital turnover improved steadily until late 2023 but suffered a significant decline around September 2024, likely due to operational or liquidity challenges, before rebounding somewhat in mid-2025.

Overall, these activity ratios reflect efforts toward operational efficiencies, with periods of improvement and challenges, impacting the company's ability to manage inventories, receivables, and payables effectively over time.

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Average number of days

The analysis of CSW Industrials, Inc.'s activity ratios over the specified periods reveals notable trends in inventory management, receivables collection, and payables payment practices.

Days of Inventory on Hand (DOH):
The company's inventory holdings exhibited fluctuations over the analyzed period. Starting at approximately 93.10 days as of September 30, 2020, DOH increased significantly, peaking at around 177.55 days by December 31, 2020. This suggests a period of overstocking or slower inventory turnover during that quarter. Subsequently, there was a downward trend, with DOH decreasing to approximately 125.57 days by September 30, 2023, indicating improved inventory efficiency. Nevertheless, some increases occurred intermittently, such as approaching 156.29 days by December 2024, hinting at potential inventory build-up periods. Overall, the company has demonstrated efforts to reduce inventory levels, reflecting a focus on optimizing stock turnover rates.

Days of Sales Outstanding (DSO):
Receivables collection periods initially experienced an increase from about 67.66 days on September 30, 2020, reaching a peak of roughly 84.19 days in March 2021. Afterward, DSO generally declined, with notable lows near 48.81 days by December 2024. This pattern indicates a trend toward faster collections, enhancing cash flow efficiency. Slight fluctuations are evident, with some increases during certain quarters, but the overall trajectory suggests an improvement in receivables management and customer credit policies over time.

Number of Days Payables:
The company’s payables deferral period initially grew from approximately 37.06 days at September 2020 to about 56.58 days by June 2021, reflecting an increase in the time taken to settle liabilities. Post-June 2021, the days payable showed variability, but a downward tendency is visible, with periods averaging around 35-40 days, consistent with management's strategy to optimize payment timing. However, a slight elongation occurred starting in late 2023, reaching around 50 days by September 2024, suggesting a moderate lengthening of payment periods.

Overall Implications:
The trends in activity ratios suggest that CSW Industrials has been actively refining its operational efficiencies. The reduction in inventory days aligns with better inventory turnover, possibly driven by enhanced supply chain management. The steady decline in DSO indicates improvements in receivables collection processes, contributing to stronger liquidity. Meanwhile, variability in payables days reflects strategic management of liabilities, balancing supplier relationships with cash flow considerations. Collectively, these activity ratios depict a company progressively optimizing its working capital management over the analyzed period.

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Long-term

The long-term activity ratios for CSW Industrials, Inc. demonstrate notable trends in asset utilization over the period under review. Specifically, the fixed asset turnover ratio, which measures the efficiency of fixed asset utilization to generate sales, exhibits a significant change. Data from September 30, 2020, through March 31, 2024, indicates that the ratio consistently remains undefined, suggesting either the absence of fixed assets or inability to calculate the ratio during that period. However, starting from September 30, 2024, the ratio stabilizes around 5.52 to 5.65, with slight fluctuations through June 30, 2025 (ranging from 5.34 to 5.65). This indicates a relatively stable and efficient utilization of fixed assets in generating sales once the ratio becomes observable.

The total asset turnover ratio, which portrays the company's efficiency in using total assets to produce sales, shows a marked improvement over time. Beginning at 0.97 on September 30, 2020, and declining sharply to 0.44 by December 31, 2020, there was an initial decrease in asset efficiency. Afterward, the ratio steadily increases, reaching 0.77 by September 30, 2023, and remaining relatively stable around 0.62 to 0.78 through subsequent periods up to June 30, 2025. This upward trend suggests that CSW Industrials improved its overall asset utilization efficiency over the subsequent years, culminating in nearing pre-decline levels.

In summary, although the fixed asset turnover ratio data is limited to later periods, the total asset turnover indicates a progressive enhancement in asset utilization efficiency from late 2020 onwards. The stabilization of both ratios in recent periods points to a mature phase of operational efficiency, with effective deployment of both fixed and total assets to support sales generation.