Hormel Foods Corporation (HRL)

Short-term

Turnover ratios

The activity ratios of Hormel Foods Corporation provide insights into the efficiency of the company's operations in managing its inventory, receivables, payables, and working capital turnover over the past five years.

1. Inventory Turnover:
- Hormel Foods Corporation's inventory turnover ratio has been relatively stable over the past five years, with values ranging from 6.53 to 7.99 times. This indicates that the company has been able to effectively manage its inventory levels and turn over its inventory multiple times within a given period.
- A higher inventory turnover ratio suggests that the company is efficiently managing its inventory and selling products quickly, which can help in reducing carrying costs and minimizing the risk of obsolete inventory.

2. Receivables Turnover:
- The receivables turnover ratio has also shown consistency over the years, with values ranging from 12.54 to 14.60 times. This indicates that Hormel Foods Corporation has been successful in collecting payments from its customers in a timely manner.
- A higher receivables turnover ratio reflects effective credit management practices and the company's ability to convert credit sales into cash quickly.

3. Payables Turnover:
- The payables turnover ratio for Hormel Foods Corporation has been relatively stable, with values ranging from 13.03 to 14.86 times. This indicates that the company is efficiently managing its accounts payable by paying its suppliers in a timely manner.
- A higher payables turnover ratio may indicate that the company is taking advantage of trade credit terms effectively and managing its cash flow efficiently.

4. Working Capital Turnover:
- The working capital turnover ratio has varied significantly over the past five years, ranging from 4.62 to 12.21 times. This ratio reflects how efficiently the company is utilizing its working capital to generate sales revenue.
- A higher working capital turnover ratio indicates that Hormel Foods Corporation is effectively using its working capital to support its operations and generate revenue.

In conclusion, based on the analysis of these activity ratios, Hormel Foods Corporation has shown consistent efficiency in managing its inventory, receivables, payables, and working capital turnover, which is crucial for maintaining financial health and operational effectiveness.

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Average number of days

To analyze Hormel Foods Corporation's activity ratios, we look at the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

1. Days of Inventory on Hand (DOH): DOH measures how many days it takes for a company to sell its inventory. A higher DOH indicates slower inventory turnover. Hormel Foods Corporation's DOH has been relatively stable over the past few years, ranging from 45.71 days in 2020 to 55.92 days in 2022. The latest figure of 52.65 days in 2024 suggests the company's inventory turnover has improved slightly compared to the previous year.

2. Days of Sales Outstanding (DSO): DSO reflects the average number of days it takes for a company to collect payment after making a sale. A lower DSO is generally favorable as it indicates faster cash collection. Hormel Foods Corporation has seen a decrease in DSO from 29.10 days in 2021 to 26.59 days in 2024. This trend suggests the company has been more efficient in collecting receivables, potentially improving its cash flow position.

3. Number of Days of Payables: This ratio represents the average number of days a company takes to pay its suppliers. A higher number of days of payables indicates a longer payment cycle, which may suggest favorable terms with suppliers. Hormel Foods Corporation's days of payables have fluctuated slightly over the years, ranging from 25.35 days in 2023 to 27.47 days in 2020. The latest figure of 24.57 days in 2024 indicates the company has been able to manage its payables more efficiently compared to the previous year.

Overall, the analysis of Hormel Foods Corporation's activity ratios suggests improvements in inventory turnover and receivables collection, along with efficient management of payables. These trends indicate that the company has been effectively managing its working capital and operational efficiency in recent years.

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Long-term

Hormel Foods Corporation's long-term activity ratios provide insight into the company's efficiency in utilizing its fixed assets and total assets to generate sales.

The fixed asset turnover has shown a consistent trend of improvement over the past five years, increasing from 5.22 in 2020 to 5.51 in 2024. This indicates that for every dollar invested in fixed assets, the company generated $5.51 in sales in 2024. The rising trend suggests that Hormel Foods has been more efficient in using its fixed assets to drive revenue over the years.

On the other hand, the total asset turnover ratio has remained relatively stable, hovering around 0.89 to 0.97 from 2020 to 2024. This implies that the company has been generating approximately $0.89 to $0.97 in sales for every dollar invested in total assets during this period.

Overall, Hormel Foods Corporation has demonstrated strong efficiency in utilizing its fixed assets to generate sales, as evidenced by the increasing fixed asset turnover ratio. Although the total asset turnover has remained stable, the company's ability to generate sales from its total assets has been consistent over the years.