Flowserve Corporation (FLS)

Short-term

Turnover ratios

Flowserve Corp.'s activity ratios provide insights into the efficiency of its operations in managing inventory, receivables, payables, and overall working capital.

1. Inventory turnover:
- Flowserve's inventory turnover has been relatively stable over the past five years, ranging from 3.26 to 4.01 times. This indicates that the company is effectively managing its inventory levels, with the ability to sell and replace its inventory multiple times within a year. However, a decreasing trend in recent years may suggest potential issues with sales or inventory management efficiency.

2. Receivables turnover:
- The receivables turnover ratio has shown fluctuations but generally remained within a narrow range of 4.16 to 4.96 times. A higher turnover ratio implies that Flowserve is efficient in collecting payments from customers, translating credit sales into cash quickly. However, variations in the ratio could indicate changes in the company's credit policies or customer payment behavior.

3. Payables turnover:
- Flowserve's payables turnover has also been consistent, ranging from 5.50 to 6.08 times over the five-year period. A high payables turnover ratio suggests that the company is paying off its suppliers promptly, which can help maintain good relationships and potentially negotiate favorable terms. The stability of this ratio indicates a consistent approach to managing trade payables.

4. Working capital turnover:
- The working capital turnover ratio measures how effectively Flowserve is utilizing its working capital to generate sales. The ratio has shown some fluctuations, with the highest value in 2023 at 3.41 times. A higher turnover implies efficient utilization of working capital, indicating that the company is generating more revenue for each dollar of working capital invested. However, the variability in this ratio over the years may indicate changes in the company's operational efficiency or capital management strategies.

Overall, while Flowserve Corp. demonstrates reasonable efficiency in managing its inventory, receivables, payables, and working capital, analyzing these activity ratios together can provide a more comprehensive understanding of the company's operational effectiveness and potential areas for improvement.

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Average number of days

The activity ratios for Flowserve Corp. provide insights into the efficiency of the company's operational processes.

1. Days of Inventory on Hand (DOH):
- Flowserve's days of inventory on hand have shown a fluctuating trend over the past five years, ranging from 91.04 days in 2019 to 111.86 days in 2022.
- A higher DOH indicates that Flowserve is holding onto inventory for a longer period before selling it, which may tie up capital and increase holding costs.
- The decreasing trend from 2022 to 2023 suggests that Flowserve may be managing its inventory more efficiently in the most recent year.

2. Days of Sales Outstanding (DSO):
- Flowserve's days of sales outstanding have varied between 73.61 days in 2019 and 87.70 days in 2022.
- A lower DSO indicates that the company is collecting its accounts receivable faster, which is a positive sign of efficient credit policies and collection efforts.
- The decreasing trend in DSO over the years implies that Flowserve has been improving its collection process, resulting in quicker cash conversion from sales.

3. Number of Days of Payables:
- Flowserve's number of days of payables has ranged from 61.66 days in 2019 to 66.40 days in 2022.
- A higher number of days of payables means that the company is taking longer to pay its suppliers, which can be advantageous for cash flow management.
- The increasing trend in payables days from 2019 to 2022 suggests that Flowserve may be negotiating better payment terms with its suppliers, providing additional liquidity.

Overall, analyzing Flowserve Corp.'s activity ratios reveals how the company manages its inventory, accounts receivable, and accounts payable, offering valuable insights into its operational efficiency and financial performance over the years.

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Long-term

Flowserve Corp.'s long-term activity ratios reflect the company's efficiency in utilizing its assets to generate sales over the past five years. The fixed asset turnover ratio has been improving steadily, indicating that the company has become more effective in generating sales from its fixed assets. This suggests that Flowserve is increasingly efficient in managing and utilizing its long-term assets like property, plant, and equipment.

On the other hand, the total asset turnover ratio has fluctuated over the same period but has generally shown an upward trend. This ratio measures the company's ability to generate sales from all its assets, including both current and non-current assets. The increasing trend in this ratio implies that Flowserve is becoming more efficient in generating sales from its total asset base.

Overall, the improvement in both fixed asset turnover and total asset turnover ratios indicates that Flowserve is managing its assets effectively to drive revenue growth and maximize its operational efficiency. This could be a positive sign for potential investors and stakeholders, as it shows the company's ability to generate sales from its asset base.