GMS Inc (GMS)

The liquidity ratios of GMS Inc over the period from April 2021 to April 2025 demonstrate a general trend of relative stability with some notable fluctuations.

The current ratio, which measures the company's ability to meet its short-term obligations with its current assets, remained above 1.9 throughout the period, indicating adequate short-term liquidity. Specifically, it increased from 1.96 in April 2021 to a peak of 2.19 in April 2023, reflecting improved liquidity and the capacity to cover current liabilities with current assets. There was a slight decline in the following year, reaching 2.17 in April 2024, before decreasing further to 1.91 in April 2025, nearing the lower threshold but still indicating a generally acceptable liquidity position.

The quick ratio, which assesses liquidity excluding inventory, showed a less consistent trend. It was 1.29 in April 2021, slightly decreasing to 1.24 in April 2022. It then increased to 1.35 in April 2023 and maintained the same level through April 2024, before declining sharply to 0.97 in April 2025. The decline below 1. in 2025 suggests a reduction in the company's ability to meet short-term liabilities with its most liquid assets, raising potential concerns about liquidity that cannot be mitigated solely through inventory liquidation.

The cash ratio, which provides the most conservative view by considering only cash and cash equivalents, exhibited a decreasing trend over the period. It was 0.30 in April 2021, significantly declining to 0.15 in April 2022, then rising modestly to 0.23 in April 2023, but decreasing again to 0.22 in April 2024 and reaching a low of 0.07 in April 2025. This downward trend indicates a declining proportion of cash and cash equivalents relative to current liabilities, which could impact the company's ability to meet immediate obligations without resorting to other current assets.

Overall, GMS Inc maintains healthy current and quick ratios throughout most of the period, signifying stable short-term liquidity in the earlier years. However, the sharp decline in the cash ratio by April 2025 highlights increasing reliance on other assets or potential liquidity pressures, warranting ongoing monitoring of the company's liquidity position to assess its capacity for meeting immediate liabilities.

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Additional liquidity measure

The cash conversion cycle (CCC) of GMS Inc has exhibited notable fluctuations over the period from April 30, 2021, to April 30, 2025. At the end of April 2021, the CCC was approximately 67.38 days. This metric increased significantly by April 30, 2022, reaching approximately 80.37 days, indicating a lengthening of the cycle and potentially reflecting longer periods to convert investments in inventory and receivables into cash.

Subsequently, by April 30, 2023, the CCC decreased slightly to approximately 74.37 days, suggesting a partial improvement but still remaining elevated relative to the 2021 level. This downward movement continued into April 30, 2024, with the CCC declining further to approximately 72.12 days. Over this period, the company appeared to be making progress toward more efficient cash management and working capital utilization.

The most recent data available, as of April 30, 2025, shows a significant reduction to approximately 62.55 days. This decrease reflects a substantial improvement in the company's cash conversion efficiency, implying shorter cycles to turn inventory and receivables into cash. Overall, the trend indicates that GMS Inc has been progressively enhancing its cash conversion cycle over the four-year span, moving toward a more optimized working capital cycle and potentially improving its liquidity and operational efficiency.