Dril-Quip Inc (DRQ)

Short-term

Turnover ratios

The activity ratios for Dril-Quip, Inc. provide insights into the company's efficiency in managing its operations and working capital.

1. Inventory Turnover: The inventory turnover ratio measures how effectively the company is managing its inventory. A lower inventory turnover may indicate overstocking or slow-moving inventory, while a higher turnover suggests efficient inventory management. Dril-Quip's inventory turnover has fluctuated over the years, with a decrease in 2020 followed by a slight increase in 2023. Overall, the company's inventory turnover remains relatively stable, indicating consistent inventory management practices.

2. Receivables Turnover: The receivables turnover ratio reflects how efficiently the company collects its outstanding receivables. A higher turnover ratio indicates faster collection of receivables, reflecting strong credit control and efficient collection processes. Dril-Quip's receivables turnover has varied over the years but has generally maintained within a close range, suggesting a consistent approach to managing receivables.

3. Payables Turnover: The payables turnover ratio measures how quickly the company pays its suppliers. A higher payables turnover ratio may indicate that the company is efficiently managing its payables and taking advantage of credit terms. Dril-Quip's payables turnover has shown a decreasing trend over the years, indicating a longer time taken to pay its suppliers. However, the ratio is still at a relatively healthy level, suggesting effective management of payables.

4. Working Capital Turnover: The working capital turnover ratio evaluates how efficiently the company is using its working capital to generate sales revenue. A higher ratio indicates better utilization of working capital. Dril-Quip's working capital turnover has shown fluctuations over the years, but the general trend indicates a slight improvement in 2023 compared to previous years. This suggests that the company is utilizing its working capital more effectively to support its revenue generation.

In summary, Dril-Quip, Inc.'s activity ratios indicate a generally stable and efficient management of inventory, receivables, payables, and working capital. The company demonstrates consistent practices in managing its operations and working capital, which is essential for maintaining financial health and sustainability.

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Average number of days

Dril-Quip, Inc.'s activity ratios provide insights into the efficiency of the company in managing its inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH): The trend in DOH indicates the number of days it takes for the company to sell its inventory. A decreasing trend from 287.64 days in 2020 to 230.23 days in 2023 shows improvement in managing inventory levels efficiently, resulting in faster turnover.

2. Days of Sales Outstanding (DSO): DSO reflects the average number of days it takes for the company to collect revenue after a sale. The increasing trend from 218.36 days in 2019 to 244.44 days in 2023 signifies a potential issue in collecting receivables promptly, leading to cash flow challenges.

3. Number of Days of Payables: This ratio indicates how long the company takes to pay its suppliers. The trend shows an increasing average over the years, from 50.65 days in 2020 to 77.73 days in 2023. This suggests that Dril-Quip, Inc. is taking longer to settle its payables, potentially impacting supplier relationships.

In summary, while Dril-Quip, Inc. has shown improvements in managing inventory turnover, there are concerns regarding the collection of receivables and the extended payment periods for payables. Monitoring and managing these activity ratios will be crucial for the company to maintain efficient operations and optimize its cash flow position.

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Long-term

The long-term activity ratios for Dril-Quip, Inc., specifically the fixed asset turnover and total asset turnover, provide insights into the company's efficiency in utilizing its assets to generate revenue over the years.

1. Fixed Asset Turnover:
The fixed asset turnover ratio measures how effectively the company is generating revenue from its investment in fixed assets. A higher ratio indicates that the company is efficiently using its fixed assets to generate sales.
In the case of Dril-Quip, Inc., the fixed asset turnover ratio has fluctuated over the last five years, ranging from 1.49 to 2.00. The decreasing trend from 2019 to 2021 suggests a potential decrease in the company's ability to generate revenue from its fixed assets. However, there was a slight improvement in 2022 and 2023, but the ratio remains below the peak achieved in 2022.

2. Total Asset Turnover:
The total asset turnover ratio indicates how well the company is utilizing all its assets to generate sales. A higher total asset turnover ratio indicates more efficient asset utilization to generate revenue.
For Dril-Quip, Inc., the total asset turnover ratio has shown a relatively stable trend over the last five years, fluctuating between 0.32 and 0.41. This stability suggests that the company has maintained its efficiency in generating sales relative to its total assets. The increase in the total asset turnover ratio from 2021 to 2023 indicates an improvement in the company's ability to generate revenue from its total asset base.

In conclusion, while the fixed asset turnover ratio for Dril-Quip, Inc. has shown some fluctuation, indicating varying efficiency in utilizing fixed assets to generate revenue, the total asset turnover ratio has remained stable or improved over the years, suggesting efficient overall asset utilization. It is essential for the company to monitor these ratios to ensure optimal asset management and continued revenue generation.