Laboratory Corporation of America Holdings (LH)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 18.53 | 17.33 | 26.15 | 21.33 | 33.93 |
| Receivables turnover | 6.38 | 5.36 | 7.17 | 5.64 | 7.48 |
| Payables turnover | 10.63 | 9.57 | 16.89 | 14.13 | 13.13 |
| Working capital turnover | 22.51 | 7.67 | 6.33 | 6.83 | 35.51 |
Inventory turnover has been steadily decreasing from 2019 to 2023, indicating that Laboratory Corp. Of America Holdings takes longer to sell its inventory. This could imply either overstocking or declining demand for its products.
Receivables turnover shows an improvement in collecting its receivables efficiently over the years, with a peak in 2023. This means the company is collecting its outstanding receivables at a faster rate, which is a positive sign for its cash flow.
Payables turnover has been fluctuating but generally decreasing since 2021. This may indicate a longer time taken to pay off its creditors, which could lead to strained supplier relationships or potential liquidity issues.
The working capital turnover has been volatile, with a significant increase in 2023 compared to the previous years. A higher working capital turnover ratio could suggest that the company is efficiently using its working capital to generate sales. However, the fluctuating nature of this ratio warrants further investigation into the company's operational efficiency and financial management.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 19.69 | 21.06 | 13.96 | 17.11 | 10.76 |
| Days of sales outstanding (DSO) | days | 57.20 | 68.04 | 50.89 | 64.75 | 48.77 |
| Number of days of payables | days | 34.34 | 38.14 | 21.60 | 25.84 | 27.80 |
The Days of Inventory on Hand (DOH) for Laboratory Corp. Of America Holdings has increased over the last five years. The company held inventory for an average of 19.69 days in 2023, compared to 16.37 days in 2022 and 10.76 days in 2019. This trend indicates that the company is taking longer to sell its inventory, potentially tying up more capital in unsold goods.
The Days of Sales Outstanding (DSO) also show a fluctuating pattern over the years, with a peak in 2020 at 78.77 days, then a decrease in 2023 to 62.99 days. This ratio measures how long it takes the company to collect payment from its customers. Lower DSO values are preferable as they indicate quicker turnover of accounts receivable.
In terms of the Number of Days of Payables, the company has shown some variability, with the number of days fluctuating between 21.60 days in 2021 to 34.34 days in 2023. This metric reflects how long it takes the company to pay its suppliers. A higher number of days of payables can indicate that the company is taking longer to settle its debts, potentially improving its cash flow.
Overall, the analysis of Laboratory Corp. Of America Holdings' activity ratios indicates a need for careful monitoring of inventory levels to ensure efficient turnover and management of working capital. The company has made some improvements in accounts receivable management but needs to focus on optimizing its payables to maintain healthy cash flows.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 4.18 | 4.25 | 5.73 | 5.12 | 4.38 |
| Total asset turnover | 0.73 | 0.59 | 0.79 | 0.70 | 0.64 |
Over the past five years, Laboratory Corp. Of America Holdings has exhibited a consistent trend in both fixed asset turnover and total asset turnover ratios.
Fixed asset turnover, which measures how efficiently the company utilizes its fixed assets to generate revenue, has shown a slight decrease from 5.73 in 2021 to 4.18 in 2023. This decline may indicate that the company's fixed assets are being less effectively utilized to generate sales in the current year compared to the previous years.
On the other hand, the total asset turnover ratio, which gauges the company's overall asset utilization efficiency in generating sales, has remained relatively stable around the range of 0.64 to 0.79 over the five-year period. This consistency suggests that the company has been maintaining a steady level of revenue generation relative to its total assets.
In conclusion, while the fixed asset turnover ratio has shown a slight decline in recent years, Laboratory Corp. Of America Holdings has managed to sustain a consistent level of overall asset utilization efficiency as indicated by the total asset turnover ratio. This analysis highlights the company's ability to efficiently generate revenue relative to its asset base over the past five years.