Freshpet Inc (FRPT)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 7.17 | 8.16 | 7.02 | 7.40 | 9.72 |
| Receivables turnover | 14.25 | 13.51 | 10.34 | 12.23 | 17.29 |
| Payables turnover | 14.79 | 14.30 | 7.43 | 6.18 | 11.30 |
| Working capital turnover | 2.88 | 2.27 | 3.45 | 4.66 | 4.20 |
The activity ratios of Freshpet Inc. from 2020 to 2024 reflect notable fluctuations in operational efficiency over this period.
Inventory Turnover exhibited a decline from 9.72 times in 2020 to 7.40 in 2021 and further decreased to 7.02 in 2022. This indicates a slowing in inventory sales or turnover, suggesting an accumulation of inventory relative to sales during this period. However, in 2023, the ratio increased to 8.16, indicating an improvement in inventory management or sales efficiency, before slightly declining again to 7.17 in 2024.
Receivables Turnover showed a downward trend from 17.29 in 2020 to 12.23 in 2021 and 10.34 in 2022, pointing to a lengthening of the average collection period or reduced efficiency in collecting receivables. Nevertheless, this ratio improved in subsequent years, rising to 13.51 in 2023 and further to 14.25 in 2024, signaling more effective management of receivables and faster collection cycles.
Payables Turnover experienced significant variability over the period. It decreased from 11.30 in 2020 to 6.18 in 2021, indicating a longer average period to pay suppliers. This was followed by a slight increase to 7.43 in 2022, but a substantial rise to 14.30 in 2023 and further to 14.79 in 2024 suggests a significant extension of the payables period, possibly indicating improved negotiations with suppliers or cash flow management strategies aimed at conserving cash.
Working Capital Turnover decreased from 4.20 in 2020 to 4.66 in 2021, then sharply declined to 3.45 in 2022. The ratio continued to decline, reaching 2.27 in 2023, before a modest increase to 2.88 in 2024. This trend implies a decreasing efficiency in utilizing working capital to generate sales, with the lowest efficiency observed in 2023, followed by a slight recovery in 2024.
Overall, these activity ratios depict a period characterized by initial deterioration in inventory and receivables management, followed by gradual improvements in receivables collection and a strategic extension of payables. Meanwhile, the working capital turnover trend indicates declining operational efficiency in asset utilization over the period.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 50.91 | 44.73 | 51.98 | 49.31 | 37.54 |
| Days of sales outstanding (DSO) | days | 25.61 | 27.01 | 35.30 | 29.84 | 21.11 |
| Number of days of payables | days | 24.68 | 25.53 | 49.12 | 59.06 | 32.31 |
The activity ratios for Freshpet Inc. over the specified period demonstrate notable trends in inventory management, receivables collection, and payables payments.
Starting with Days of Inventory on Hand (DOH), the data indicates an increase from approximately 37.54 days at the close of 2020 to a peak of 51.98 days in 2022. This suggests a period during which inventory holdings were relatively higher, potentially reflecting a buildup of stock or longer production cycles. However, there was a subsequent decline in 2023 to 44.73 days, implying an improvement in inventory turnover or more efficient stock management, before rising again in 2024 to 50.91 days. The fluctuations in DOH highlight variable inventory practices, with a tendency toward longer inventory periods in recent years.
Regarding Days of Sales Outstanding (DSO), the data shows an upward trend from 21.11 days in 2020 to 35.30 days in 2022, indicating a gradual slowdown in receivables collection or extended credit terms granted to customers. Nevertheless, a notable improvement occurred in 2023 and 2024, with DSO decreasing to 27.01 and 25.61 days respectively. This reduction signifies an enhancement in receivables management and more prompt collection of outstanding accounts receivable.
The Number of Days of Payables reflects payments deferred to suppliers. Starting at 32.31 days in 2020, there was a substantial increase to 59.06 days in 2021, suggesting a period of extended credit terms or delayed payments. The ratio then decreased to 49.12 days in 2022, and further to around 25 days in both 2023 and 2024. This downward trend indicates a reduction in the period between purchase and payment, reflecting either improved cash management or stricter creditor payment policies.
Overall, the activity ratios reveal significant shifts in operational efficiency. The increase in DOH and DSO during 2021 and 2022 suggests periods of extended inventory holding and receivables collection, which may have impacted working capital. Conversely, the subsequent decreases in DSO and days of payables in 2023 and 2024 point towards enhanced receivables collection efficiency and tighter payable practices, potentially improving liquidity and operational agility.
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | — | — | 0.74 | 0.72 | 1.13 |
| Total asset turnover | 0.62 | 0.52 | 0.53 | 0.54 | 0.73 |
The analysis of Freshpet Inc.'s long-term activity ratios reveals notable trends over the period from December 31, 2020, to December 31, 2023, with projections into 2024.
The Fixed Asset Turnover ratio, which measures how effectively the company utilizes its fixed assets to generate sales, experienced a decline from 1.13 at the end of 2020 to 0.72 in 2021, indicating a reduction in efficiency. This declining trend persisted into 2022, with the ratio slightly increasing to 0.74 but remaining significantly below the 2020 level. The absence of data beyond 2022 suggests a lack of information to evaluate subsequent periods, although the 2023 and 2024 figures are marked as unavailable.
In contrast, the Total Asset Turnover ratio, which assesses overall asset efficiency in generating sales, also shows a decreasing trend from 0.73 in 2020 to 0.54 in 2021, underscoring a decline in overall asset utilization efficiency. This ratio remained relatively stable in 2022 at 0.53 and experienced a marginal decline in 2023 to 0.52. Forecasts for 2024 project an improvement to 0.62, which, if realized, would indicate a positive trend toward better asset utilization efficiency.
Overall, the data suggest that Freshpet Inc. faced decreasing efficiency in utilizing its fixed assets and total assets during the early 2020s. The stable or declining ratios point to potential challenges in asset management or operational optimization until 2023, with a possible recovery projected in 2024 for total asset turnover. Continual monitoring of these ratios would be necessary to confirm whether the anticipated improvement materializes and to assess the company's ongoing asset management strategies.