Kennametal Inc (KMT)

Short-term

Turnover ratios

Inventory turnover measures how efficiently a company is managing its inventory. Kennametal Inc has shown a fluctuating trend in inventory turnover over the past five years, with values ranging from 2.39 to 2.76. The current ratio of 2.76 indicates that the company is selling and replacing its inventory approximately 2.76 times a year, which is important to avoid excess inventory holding costs.

Receivables turnover reflects how quickly a company is collecting payments from its customers. Kennametal Inc has maintained relatively consistent receivables turnover ratios between 6.08 and 7.92 over the last five years, with a current ratio of 6.76. This suggests that the company efficiently collects payments from customers, with a higher ratio indicating faster collections.

Payables turnover shows how quickly a company is paying its suppliers. Kennametal Inc has shown variations in payables turnover ratios, ranging from 5.99 to 8.24 over the past five years, with the latest ratio at 7.41. A higher payables turnover ratio indicates that the company is paying suppliers more quickly, which can help to improve relationships and potentially negotiate better terms.

Working capital turnover measures how effectively a company is utilizing its working capital to generate sales. Kennametal Inc has displayed consistent turnover ratios between 3.25 and 3.73 over the past five years, with the current ratio at 3.49. This indicates that the company generates sales turnover relative to its working capital at a consistent rate, which is vital for maintaining liquidity and operational efficiency.

Overall, Kennametal Inc's activity ratios reflect a mix of efficiency in managing inventory, collecting receivables, paying suppliers, and utilizing working capital to generate sales. The company has shown stability and some fluctuations in these ratios over the years, which may indicate varying levels of operational efficiency and effectiveness in managing its resources.

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Average number of days

To analyze Kennametal Inc's activity ratios, we first look at days of inventory on hand (DOH). It measures how many days it takes for the company to sell its inventory. A lower DOH is generally better as it indicates faster turnover. Kennametal's DOH has decreased from 140.65 days in 2020 to 132.30 days in 2024, indicating an improvement in managing inventory turnover efficiency.

Next, we examine days of sales outstanding (DSO), which reflects how long it takes for the company to collect its accounts receivable. A lower DSO is preferable as it implies faster collection of cash. Kennametal's DSO has fluctuated over the years, with a peak of 60.05 days in 2021 but has since improved to 54.00 days in 2024.

Lastly, we consider the number of days of payables, which represents how long it takes for the company to pay its suppliers. A longer period of payables can signal better cash flow management. Kennametal's days of payables have varied, with a high of 60.96 days in 2022 and a low of 44.32 days in 2020.

Overall, Kennametal Inc has shown improvements in its inventory turnover and accounts receivable collection efficiency over the years, which can enhance its working capital management. The fluctuation in the days of payables indicates potential variations in the company's relationship with suppliers and cash flow strategies.

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Long-term

Kennametal Inc's long-term activity ratios indicate the efficiency of the company in managing its assets over the years. The fixed asset turnover has been fluctuating but generally increasing from 1.82 in 2020 to 2.18 in 2024, suggesting that the company is generating more revenue per dollar of fixed assets invested, which is a positive trend. This indicates that Kennametal is utilizing its fixed assets more effectively to generate sales.

On the other hand, the total asset turnover has shown a steady improvement over the same period, from 0.62 in 2020 to 0.82 in 2024. This indicates that Kennametal is generating more revenue per dollar of total assets employed in the business, showcasing an increasing efficiency in asset utilization.

Overall, the improving trend in both fixed asset turnover and total asset turnover ratios signifies that Kennametal Inc is effectively managing its assets and generating sales efficiently, which can be indicative of a well-run and financially sound company.