Insteel Industries Inc (IIIN)

Short-term

Turnover ratios

Insteel Industries Inc's activity ratios provide insights into how efficiently the company manages its assets and liabilities to generate sales and cash flows.

1. Inventory turnover: This ratio indicates how many times a company's inventory is sold and replaced over a period. Insteel's inventory turnover has fluctuated over the past five years, with a noticeable decline in 2022 compared to previous years. The 2024 figure of 5.40 suggests that the company has improved its inventory management efficiency compared to 2022 and 2023.

2. Receivables turnover: This ratio measures how effectively a company collects payments from its customers. Insteel's receivables turnover has remained relatively stable over the past five years, with the 2023 peak of 10.24 indicating efficient collection practices. The 2024 figure of 8.87 suggests a slight decrease in collection efficiency compared to the previous year.

3. Payables turnover: Payables turnover reflects how efficiently a company manages its payments to suppliers. Insteel's payables turnover has varied over the five-year period, with a significant peak in 2019. The 2024 figure of 12.79 indicates that the company has improved its payables management compared to 2023 but is still below the peak of 2019.

4. Working capital turnover: This ratio measures how effectively a company utilizes its working capital to generate revenue. Insteel's working capital turnover has gradually decreased over the past five years, indicating a decrease in revenue generation efficiency relative to its working capital. The 2024 figure of 2.40 suggests that the company's working capital is less productive compared to the previous years.

Overall, Insteel Industries Inc's activity ratios reflect varying levels of efficiency in managing its assets and liabilities to drive sales and cash flows. The company may need to focus on improving inventory management, maintaining steady receivables collection practices, optimizing payables turnover, and enhancing the productivity of its working capital to strengthen its financial performance.

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Average number of days

To analyze Insteel Industries Inc's activity ratios, we will focus on three key metrics:

1. Days of Inventory on Hand (DOH): This ratio measures the average number of days it takes for the company to sell its inventory. Insteel's DOH has fluctuated over the past five years, with a notable decrease in 2023 and a significant spike in 2022. The increase in 2022 could indicate issues with inventory management or market demand. A lower DOH generally implies efficient inventory turnover, which can lead to cost savings and improved cash flows.

2. Days of Sales Outstanding (DSO): DSO indicates how long it takes for a company to collect its accounts receivable. Insteel's DSO has also been volatile, with a decrease in 2022 followed by a slight increase in 2023 and 2024. A decreasing DSO suggests faster collections and better credit management practices. However, the increase in 2024 may imply potential challenges in collecting receivables promptly.

3. Number of Days of Payables: This ratio reflects the average number of days it takes for a company to pay its suppliers. Insteel's days of payables have shown variability, with fluctuations in payment terms over the years. A lower number of days indicates that the company is paying its suppliers more quickly, possibly to take advantage of discounts or maintain good relationships. Conversely, a higher number of days could suggest liquidity constraints or strained supplier relationships.

Overall, Insteel Industries Inc's activity ratios reveal mixed performance in managing its inventory, receivables, and payables over the years. The company may need to focus on optimizing its inventory levels, tightening credit policies to accelerate cash collections, and maintaining a balanced approach to managing its payables to enhance operational efficiency and financial health.

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Long-term

Insteel Industries Inc's long-term activity ratios suggest how efficiently the company is utilizing its assets to generate revenue.

The fixed asset turnover ratio indicates that the company has been able to generate $4.22 in sales for every dollar invested in fixed assets in 2024, a decrease from the previous year. This could potentially signify a lower efficiency in utilizing its fixed assets to generate revenue compared to previous years.

On the other hand, the total asset turnover ratio of 1.25 in 2024 suggests that for every dollar invested in total assets, the company generated $1.25 in sales. This ratio has declined from the prior year but remains relatively stable over the past few years.

Overall, the declining trend in both fixed asset turnover and total asset turnover ratios may indicate a potential decrease in the efficiency of asset utilization by Insteel Industries Inc in generating sales. It is important for the company to closely monitor and improve its asset management strategies to enhance its long-term profitability and performance.