DXP Enterprises Inc (DXPE)

The current ratio of DXP Enterprises Inc has shown a relatively stable trend over the past five years, ranging between 1.91 and 2.89. This indicates that the company has consistently maintained a level of current assets that is 1.91 to 2.89 times greater than its current liabilities during this period. The current ratio peaked at 2.89 by December 31, 2023, suggesting a strong ability to meet short-term obligations. However, there was a slight decline in the current ratio to 2.24 by September 30, 2024.

On the other hand, the quick ratio, which measures the company's ability to meet its short-term obligations with its most liquid assets, such as cash and equivalents, has been more volatile. The quick ratio fluctuated between 0.07 and 0.83 over the same period. Notably, there was a significant increase in the quick ratio to 0.83 by March 31, 2021, indicating a strong short-term liquidity position. However, the quick ratio decreased to 0.14 by September 30, 2024, reflecting a lower ability to cover immediate liabilities with highly liquid assets.

Moreover, the cash ratio, which specifically focuses on the ability to cover short-term liabilities using only cash and cash equivalents, has also displayed fluctuations. The cash ratio ranged from 0.07 to 0.83 during this period. A notable peak was observed at 0.83 by March 31, 2021, but it decreased to 0.14 by September 30, 2024.

Overall, the liquidity ratios of DXP Enterprises Inc demonstrate both strength and volatility in its ability to meet short-term obligations. The company has maintained a generally healthy current ratio, but the quick and cash ratios have shown more variability, indicating fluctuations in the availability of highly liquid assets to cover immediate liabilities. Analysts should continue to monitor these ratios to assess the company's ongoing liquidity position.

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Additional liquidity measure

The cash conversion cycle of DXP Enterprises Inc has shown fluctuations over the analyzed period. The cycle represents the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales, reflecting operational efficiency and liquidity management.

From March 31, 2020, to December 31, 2024, the cash conversion cycle has generally trended downwards. Initially starting at 53.36 days, it increased slightly by June 30, 2020, and fluctuated around the mid-50s days range until September 30, 2021. From there, the cycle started declining consistently, indicating improvements in inventory turnover and receivables collection efficiency.

By December 31, 2024, the cash conversion cycle had reduced to 30.21 days, reflecting a significant improvement in the company's ability to manage its working capital effectively. A shorter cycle suggests that DXP Enterprises Inc is able to generate cash more quickly from its operations, potentially enhancing its overall financial health and liquidity position.

Overall, the declining trend in the cash conversion cycle implies that DXP Enterprises Inc has been taking steps to optimize its cash flow processes, indicating better control over its working capital management. This trend can be seen as a positive sign for investors and stakeholders as it suggests improved operational efficiency and potentially stronger financial performance in the future.