IPG Photonics Corporation (IPGP)

Short-term

Turnover ratios

The activity ratios of IPG Photonics Corp provide insights into the company's efficiency in managing its inventory, receivables, payables, and working capital.

1. Inventory Turnover: The inventory turnover ratio measures how efficiently the company is managing its inventory levels. A lower inventory turnover ratio indicates that the company is holding onto its inventory for a longer period. The gradual decline in inventory turnover from 1.86 in 2019 to 1.64 in 2023 suggests that the company may be experiencing challenges in selling its inventory quickly.

2. Receivables Turnover: The receivables turnover ratio assesses how efficiently the company is collecting payments from its customers. An increasing trend in receivables turnover over the years, from 4.54 in 2020 to 5.88 in 2023, indicates that IPG Photonics Corp has been improving its receivables management, collecting payments at a faster rate.

3. Payables Turnover: The payables turnover ratio measures how quickly the company pays its suppliers. A higher payables turnover ratio suggests that the company is paying its suppliers more quickly. The fluctuating payables turnover ratio of IPG Photonics Corp from 13.69 in 2021 to 26.06 in 2023 indicates inconsistent payment patterns to suppliers.

4. Working Capital Turnover: The working capital turnover ratio evaluates how effectively the company is using its working capital to generate sales. A higher working capital turnover ratio signifies efficient utilization of working capital. IPG Photonics Corp's working capital turnover has shown fluctuations over the years, with a decrease from 0.77 in 2019 to 0.76 in 2023, indicating varying efficiency in utilizing working capital.

Overall, IPG Photonics Corp should focus on improving its inventory turnover and maintaining the efficiency demonstrated in receivables turnover, while seeking to stabilize payables turnover and working capital turnover to enhance overall operational effectiveness.

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Average number of days

The activity ratios of IPG Photonics Corp have shown some fluctuations over the past five years.

1. Days of Inventory on Hand (DOH): This ratio measures how long it takes for the company to sell its inventory. The trend in IPG Photonics Corp's DOH has been relatively consistent, ranging from 196.21 days in 2019 to 222.15 days in 2023. The increase in DOH from 2019 to 2023 may indicate slower inventory turnover or potentially excess inventory levels.

2. Days of Sales Outstanding (DSO): DSO indicates the average number of days it takes for the company to collect its accounts receivable. IPG Photonics Corp's DSO has fluctuated over the years, with the lowest being 53.96 days in 2022 and the highest at 80.35 days in 2020. A lower DSO suggests faster collection of receivables, which can improve cash flow and working capital management.

3. Number of Days of Payables: This ratio reflects the average number of days it takes for the company to pay its suppliers. IPG Photonics Corp's days of payables have decreased from 26.66 days in 2021 to 14.01 days in 2023. A declining trend in days of payables may indicate a more aggressive approach to managing payables, potentially to take advantage of early payment discounts.

Overall, IPG Photonics Corp's activity ratios suggest some variability in inventory management, collection of receivables, and payment to suppliers over the past five years. Monitoring these ratios can provide valuable insights into the company's operational efficiency and working capital management.

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Long-term

The fixed asset turnover ratio measures how efficiently a company is utilizing its fixed assets to generate revenue. IPG Photonics Corp's fixed asset turnover has fluctuated over the past five years, ranging from 2.01 to 2.46. The decreasing trend from 2022 to 2023 indicates a slight decline in the company's ability to generate sales from its fixed assets.

On the other hand, the total asset turnover ratio reflects IPG Photonics Corp's overall efficiency in generating revenue from all of its assets. The company's total asset turnover has also varied, with values ranging from 0.41 to 0.52. The ratios suggest that the company's ability to generate sales from its total assets improved in 2022 but decreased in 2023.

In conclusion, while IPG Photonics Corp has demonstrated varying efficiency levels in utilizing both its fixed and total assets to generate revenue over the years, a more detailed analysis is required to understand the underlying factors driving these trends and to assess the company's overall operational performance.