Granite Construction Incorporated (GVA)

Short-term

Turnover ratios

Granite Construction Inc.'s activity ratios provide insights into how efficiently the company is managing its resources.

1. Inventory Turnover: This ratio indicates how many times the company's inventory is sold and replaced during the year. Granite Construction Inc. has seen a decreasing trend in inventory turnover over the past five years, from 36.27 in 2019 to 29.96 in 2023. This suggests that inventory is being held for a longer period before being sold, which could tie up capital and potentially impact cash flow.

2. Receivables Turnover: This ratio measures how efficiently the company collects outstanding receivables. Granite Construction Inc. experienced fluctuations in receivables turnover over the years, with a peak in 2022 at 7.11 and a low in 2021 at 6.48. The decrease in turnover in 2023 to 5.86 may indicate potential issues with collecting payments from customers promptly.

3. Payables Turnover: The payables turnover ratio evaluates how quickly the company pays its suppliers. Granite Construction Inc. has maintained a relatively stable payables turnover ratio over the years, ranging from 7.62 to 8.96. A higher turnover ratio suggests that the company is efficiently managing its payables.

4. Working Capital Turnover: This ratio reveals how effectively the company utilizes its working capital to generate revenue. Granite Construction Inc. has shown variability in its working capital turnover over the years, with the highest ratio of 6.96 in 2020 and the lowest of 3.97 in 2021. A higher turnover ratio indicates that the company is efficiently using its working capital to generate sales.

Overall, Granite Construction Inc. should closely monitor and manage its activity ratios to ensure optimal efficiency in managing its inventory, receivables, payables, and working capital, which are crucial for sustaining financial health and operational performance.

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Average number of days

Granite Construction Inc.'s activity ratios provide insights into the efficiency of its management of inventory, accounts receivable, and accounts payable. The Days of Inventory on Hand (DOH) have shown an increasing trend over the past five years, indicating that the company is holding inventory for longer periods before converting it into sales. This could potentially tie up capital and increase carrying costs.

On the other hand, the Days of Sales Outstanding (DSO) have fluctuated over the years but have generally been on the higher side, suggesting that Granite Construction is taking longer to collect its accounts receivable. A high DSO can indicate potential issues with credit policies, collection efforts, or customer financial health.

The Number of Days of Payables has also shown fluctuations, but it has been increasing overall. A longer period of payables can indicate that the company is taking longer to pay its suppliers, potentially benefiting from improved cash flow management, but it could also strain supplier relationships if payment terms are excessively extended.

In summary, Granite Construction Inc. should focus on optimizing its inventory management to reduce DOH, improving accounts receivable collection processes to lower DSO, and balancing payables to maintain healthy relationships with suppliers while managing cash flows effectively.

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Long-term

Granite Construction Inc.'s long-term activity ratios indicate how efficiently the company is utilizing its fixed assets and total assets to generate revenue. The fixed asset turnover ratio has shown a declining trend from 6.35 in 2019 to 5.29 in 2023, indicating that the company is generating less revenue from its fixed assets over the years. This could be due to a decrease in sales or inefficient utilization of fixed assets.

On the other hand, the total asset turnover ratio has been fluctuating over the years, with a peak of 1.52 in 2022 and a low of 1.21 in 2021. A total asset turnover ratio of less than 1 suggests that the company is not efficiently utilizing its total assets to generate sales.

Overall, Granite Construction Inc. needs to focus on improving the efficiency of its asset utilization, particularly its fixed assets, to enhance revenue generation and improve long-term profitability.