Graco Inc (GGG)

Short-term

Turnover ratios

The activity ratios of Graco Inc provide insights into the efficiency of the company's operations in managing its inventory, receivables, payables, and working capital.

1. Inventory turnover: Graco Inc's inventory turnover has been fluctuating over the years, ranging from 2.28 to 2.88 times. The decreasing trend from 2020 to 2023 indicates that the company is holding onto its inventory for a longer period, which may lead to higher storage costs and potential obsolescence.

2. Receivables turnover: The consistent receivables turnover ratio around 6 suggests that Graco Inc efficiently collects its accounts receivable, indicating effective credit management and timely collection practices.

3. Payables turnover: Graco Inc's payables turnover has been increasing over the years, reaching 14.33 in 2023. A higher payables turnover ratio indicates that the company is paying its suppliers more frequently, which may signify strong bargaining power or favorable credit terms with suppliers.

4. Working capital turnover: The working capital turnover ratio measures how efficiently Graco Inc generates revenue relative to its working capital levels. The declining trend from 2019 to 2023 suggests that the company may be utilizing its working capital less effectively to generate sales revenue.

Overall, the analysis of Graco Inc's activity ratios highlights areas of strength and potential areas for improvement in the company's operational efficiency and working capital management.

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Average number of days

Graco Inc's activity ratios provide insights into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows an increase from 126.84 days in 2019 to 154.65 days in 2023. This indicates that Graco Inc is holding inventory for a longer period, which may tie up working capital and increase carrying costs.
- The rising DOH trend suggests potential inefficiencies in inventory management, such as overstocking or slow inventory turnover.

2. Days of Sales Outstanding (DSO):
- DSO has remained relatively consistent over the five-year period, fluctuating within a narrow range of 58.92 to 69.66 days. This indicates that Graco Inc is consistent in collecting receivables from its customers.
- A stable DSO suggests that the company has effective credit policies and collection procedures in place.

3. Number of Days of Payables:
- The trend in the number of days of payables shows some variability, with a decrease from 25.12 days in 2019 to 25.48 days in 2023, after peaking at 30.02 days in 2021.
- A lower number of days of payables typically indicates that Graco Inc is paying its suppliers more quickly, which may strain cash flow but can help maintain good supplier relationships.

Overall, Graco Inc's activity ratios suggest room for improvement in managing inventory more efficiently to avoid excess holding costs. The consistent DSO indicates effective credit and collection practices, while fluctuations in payables days emphasize the importance of maintaining a balanced approach to managing trade credit.

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Long-term

The fixed asset turnover ratio measures how effectively a company utilizes its fixed assets to generate revenue. It indicates the company's ability to efficiently generate sales using its long-term assets. Graco Inc's fixed asset turnover has been declining over the past five years, from 5.06 in 2019 to 2.96 in 2023. This decline suggests that Graco Inc is becoming less efficient in utilizing its fixed assets to generate revenue.

Total asset turnover ratio reflects the company's ability to generate sales from its total assets. A lower total asset turnover ratio may indicate that the company is not efficiently utilizing its assets to generate sales. Graco Inc's total asset turnover ratio has fluctuated over the past five years, ranging from 0.81 in 2021 and 2023 to 0.97 in 2019. The lower total asset turnover ratios in recent years suggest that Graco Inc may be facing challenges in effectively utilizing its total assets to generate revenue.

Overall, the declining trend in fixed asset turnover and relatively low total asset turnover ratios indicate a potential inefficiency in Graco Inc's utilization of its fixed and total assets to generate sales. It may be beneficial for the company to analyze its asset management strategies and seek ways to improve asset utilization efficiency in order to enhance its long-term profitability and operational effectiveness.