Graphic Packaging Holding Company (GPK)

Short-term

Turnover ratios

The activity ratios of Graphic Packaging Holding Company over the five-year period indicate the efficiency of the company in managing its key operational aspects:

1. Inventory Turnover: The inventory turnover ratio of Graphic Packaging Holding Company has shown a slight fluctuation over the years, ranging from 4.39 to 5.32. A higher inventory turnover suggests that the company is effectively managing its inventory levels and converting it into sales more frequently.

2. Receivables Turnover: The receivables turnover ratio has been relatively consistent, increasing from 8.33 to 11.60 over the five-year period. This indicates that the company is efficiently collecting its accounts receivables, potentially minimizing the risk of bad debts and improving liquidity.

3. Payables Turnover: The payables turnover ratio has shown some variability, with a peak in 2022 and a decline in 2024. However, the overall trend suggests that Graphic Packaging Holding Company is managing its payables effectively, balancing the time taken to pay suppliers with maintaining good relationships.

4. Working Capital Turnover: The working capital turnover ratio has fluctuated significantly, indicating changes in how efficiently the company is utilizing its working capital to generate revenue. A higher turnover ratio signifies that the company is generating more revenue for each unit of working capital invested.

Overall, the analysis of these activity ratios suggests that Graphic Packaging Holding Company has been consistently focused on managing its operational activities efficiently, with notable improvements in receivables turnover and stable performance in inventory and payables turnover.

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Average number of days

Activity ratios provide insights into the efficiency of a company's operations. Let's analyze the activity ratios of Graphic Packaging Holding Company based on the provided data:

1. Days of Inventory on Hand (DOH):
- The trend of Graphic Packaging's DOH over the years shows some fluctuations:
- In 2020, the company had 75.41 days of inventory on hand, which decreased to 74.77 days in 2021.
- The DOH decreased further to 68.66 days in 2022, but then increased to 77.55 days in 2023 and 83.08 days in 2024.
- A high DOH may indicate excess inventory levels, which could tie up capital and lead to higher storage costs.
- It is important for companies to manage inventory efficiently to ensure optimal use of resources.

2. Days of Sales Outstanding (DSO):
- The DSO for Graphic Packaging also varied over the years:
- In 2020, the company had 36.39 days of sales outstanding, which increased to 43.81 days in 2021.
- Subsequently, the DSO improved to 33.99 days in 2022, 32.33 days in 2023, and 31.46 days in 2024.
- A lower DSO indicates that the company is collecting its accounts receivable more quickly, which can improve cash flow and liquidity.
- Efficient management of accounts receivable is crucial for maintaining healthy working capital levels.

3. Number of Days of Payables:
- The days of payables for Graphic Packaging also showed variations:
- The company had 55.15 days of payables in 2020, which increased to 60.64 days in 2021.
- The number of days of payables then decreased to 48.01 days in 2022 and remained relatively stable at around 48-53 days in the following years.
- Extending payables can provide a source of short-term financing, but it is essential to strike a balance between managing cash flow and maintaining good relationships with suppliers.

In summary, monitoring activity ratios like DOH, DSO, and days of payables can help in assessing how efficiently Graphic Packaging Holding Company manages its inventory, accounts receivable, and payables, respectively. An optimal balance in these areas is crucial for maintaining liquidity, managing working capital effectively, and supporting overall financial health.

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Long-term

The Fixed Asset Turnover ratio measures how efficiently Graphic Packaging Holding Company is utilizing its fixed assets to generate revenue. A higher ratio indicates better utilization of fixed assets.

In 2020, the Fixed Asset Turnover was 1.84, indicating that for every dollar invested in fixed assets, the company generated $1.84 in revenue. However, this ratio declined to 1.53 in 2021, suggesting a lower efficiency in asset utilization.

The company's efficiency improved in 2022 with a Fixed Asset Turnover of 2.06, demonstrating that Graphic Packaging utilized its fixed assets more effectively to generate revenue. In 2023, the ratio decreased slightly to 1.89, but still indicated a relatively efficient use of fixed assets.

By 2024, the Fixed Asset Turnover had decreased to 1.67, although it remained above the 2021 level, but below the peak reached in 2022. This ratio suggests that the company may not be utilizing its fixed assets as efficiently as it did in 2022.

Total Asset Turnover measures how effectively Graphic Packaging is using its total assets to generate sales. A higher ratio implies better asset utilization.

In 2020, the Total Asset Turnover was 0.84, indicating that the company generated $0.84 in sales for every dollar of assets. This ratio decreased to 0.68 in 2021, reflecting a decline in the company's effectiveness in generating sales from its total assets.

However, there was an improvement in 2022 with a Total Asset Turnover of 0.91, suggesting that the company was utilizing its total assets more efficiently to drive sales. The ratio then dropped slightly to 0.84 in 2023, indicating a slight decrease in asset utilization efficiency.

By 2024, the Total Asset Turnover had decreased further to 0.79, indicating that the company may not be generating as much revenue for every dollar of total assets compared to previous years.

Overall, while there were fluctuations in the long-term activity ratios of Graphic Packaging Holding Company, there were periods of improved asset utilization in both fixed asset turnover and total asset turnover, which is essential for the company's operational efficiency and financial performance.