Hormel Foods Corporation (HRL)

Short-term

Turnover ratios

Based on the activity ratios provided for Hormel Foods Corp., the following analysis can be made:

1. Inventory Turnover:
- Hormel Foods Corp. shows relatively stable inventory turnover ratios over the quarters, ranging between 5.84 and 6.49 times per year. This indicates that the company is efficient in managing its inventory levels, with an average of approximately 6 times per year.

2. Receivables Turnover:
- The company demonstrates a consistent trend of high receivables turnover ratios, with values ranging between 14.24 and 16.16 times per year. This suggests that Hormel Foods Corp. efficiently collects its accounts receivable, on average approximately 15 times per year.

3. Payables Turnover:
- The payables turnover data is missing for some quarters, but ratios provided show that the company takes approximately 13-14 days to pay its suppliers. However, the incomplete data limits a comprehensive analysis of the company's payables management efficiency.

4. Working Capital Turnover:
- Hormel Foods Corp. portrays a varying trend in working capital turnover ratios, indicating a range of 5.76 to 13.06 times per year. This signifies the number of times the company cycles through its working capital in a year. The fluctuations may suggest changes in the operational efficiency and effectiveness in managing its working capital.

Overall, Hormel Foods Corp. displays efficient management of its inventory and receivables, as reflected in the inventory turnover and receivables turnover ratios. However, there may be a need for further analysis on payables management efficiency based on the missing data. The fluctuating trend in working capital turnover ratios implies potential variations in the company's operational efficiency and capital management practices over the analyzed quarters.

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Average number of days

To analyze Hormel Foods Corp.'s activity ratios based on the provided data, we will focus on three key ratios: Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables (DOP).

1. Days of Inventory on Hand (DOH):
- DOH measures the average number of days it takes for a company to sell its entire inventory.
- Hormel Foods Corp.'s DOH has fluctuated over the past eight quarters, ranging from 56.23 days to 62.53 days.
- Generally, a lower DOH is preferable as it indicates efficient inventory management. However, an excessively low DOH may lead to stockouts and potential lost sales.

2. Days of Sales Outstanding (DSO):
- DSO reflects the average number of days it takes for a company to collect payment after a sale.
- Hormel Foods Corp.'s DSO has also varied over the quarters, with values between 22.59 days and 25.63 days.
- A lower DSO indicates faster collection of receivables and better cash flow management. Conversely, a high DSO may signal issues with credit policies or customer payment delays.

3. Number of Days of Payables (DOP):
- DOP shows the average number of days it takes a company to pay its suppliers.
- The data shows certain quarters where the DOP information is missing, while the available values range from 25.31 days to 28.95 days.
- A longer DOP suggests that the company is taking longer to pay its suppliers, potentially benefiting from improved liquidity. However, excessively long DOP may strain relationships with suppliers.

In summary, an in-depth analysis of Hormel Foods Corp.'s activity ratios reveals fluctuations in inventory management, receivables collection, and payment practices over the past quarters. Careful monitoring and potential adjustments in these areas could lead to enhanced operational efficiency and financial performance for the company.

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Long-term

Hormel Foods Corp. has maintained a stable fixed asset turnover ratio over the past eight quarters, ranging from 5.59 to 5.83. This indicates that the company generates $5.59 to $5.83 in revenue for every dollar invested in fixed assets, such as property, plant, and equipment. The consistent high fixed asset turnover suggests efficient utilization of these assets to generate sales.

On the other hand, the total asset turnover ratio has shown a slight downward trend from 0.96 in Q3 2022 to 0.90 in Q1 2024. This ratio signifies how effectively the company generates sales from all its assets, including both fixed and current assets. A decreasing total asset turnover may indicate that Hormel Foods Corp. is becoming less efficient in utilizing its total assets to generate revenue over time.

In conclusion, while Hormel Foods Corp. has maintained a strong fixed asset turnover ratio, there is a trend of decreasing total asset turnover, which may require further analysis to understand the reasons behind this decline.