Lumentum Holdings Inc (LITE)

Short-term

Turnover ratios

Lumentum Holdings Inc's inventory turnover has been relatively consistent over the past five years, ranging from 2.10 to 6.59 times. This indicates that the company has been efficient in managing its inventory levels and converting them into sales. The decreasing trend from 6.59 in 2021 to 4.12 in 2024 may suggest a slight decrease in inventory turnover efficiency.

On the other hand, the receivables turnover ratio has shown significant fluctuations over the same period, ranging from 258.58 to 468.59 times. The sharp increase in 2024 compared to prior years indicates that the company has been collecting its receivables more frequently, which can be a positive sign of effective credit management and liquidity.

Lumentum's payables turnover has generally increased over the past five years, with a notable improvement from 2.63 in 2020 to 13.00 in 2024. This implies that the company is taking longer to pay its suppliers, which can potentially improve cash flow and working capital management.

Lastly, the working capital turnover ratio has also exhibited an increasing trend, showing the company's ability to generate sales from its working capital. The ratio has improved from 0.91 in 2020 to 2.06 in 2024, indicating that Lumentum has been more efficient in utilizing its working capital to support its operations and sales growth.

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Average number of days

Based on the activity ratios provided for Lumentum Holdings Inc over the past five years, we can observe the following trends:

Days of Inventory on Hand (DOH):
- The days of inventory on hand have fluctuated over the years, ranging from 55.36 days in 2021 to 174.02 days in 2020.
- A decrease in the DOH from 2020 to 2021 indicates better inventory management efficiency, as the company reduced the number of days it took to sell its inventory.
- However, the increase in DOH in 2024 compared to the previous years suggests a potential buildup of inventory, which could tie up the company's capital.

Days of Sales Outstanding (DSO):
- The days of sales outstanding have shown relatively stable performance over the years, with minor fluctuations ranging from 0.78 days to 1.41 days.
- A lower DSO indicates faster collection of accounts receivable, which is generally favorable as it improves cash flow and liquidity for the company.

Number of Days of Payables:
- The number of days of payables has also varied across the years, with the range being from 28.08 days to 138.92 days.
- A lower number of days of payables indicates that the company is paying its suppliers more quickly, which could help maintain good relationships with vendors.
- Conversely, a higher number of days of payables could suggest that the company is taking longer to pay its bills, potentially indicating financial strain or cash flow issues.

In summary, Lumentum Holdings Inc should monitor its inventory levels closely to avoid excessive buildup, continue to manage its accounts receivable efficiently, and carefully evaluate its payment terms with suppliers to maintain a healthy balance between cash flow and relationships with stakeholders.

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Long-term

Lumentum Holdings Inc's long-term activity ratios provide insights into how efficiently the company is utilizing its assets to generate sales over the years. The fixed asset turnover ratio measures the company's ability to generate sales from its investment in fixed assets. A higher fixed asset turnover indicates better efficiency in utilizing fixed assets to generate revenue.

From 2020 to 2024, Lumentum's fixed asset turnover ratio has shown fluctuation, ranging from 3.54 to 4.75. The ratio reached its peak in 2024 at 4.75, indicating that the company generated $4.75 in sales for every dollar invested in fixed assets. This improvement over the years suggests that Lumentum has been increasingly efficient in utilizing its fixed assets to drive sales growth.

On the other hand, the total asset turnover ratio reflects the company's ability to generate sales from all its assets. A higher total asset turnover signifies that the company is effectively utilizing all its assets (both fixed and current) to generate revenue.

Lumentum's total asset turnover ratio has also shown variability from 0.37 in 2023 to 0.69 in 2024. The significant increase in the total asset turnover ratio from 2023 to 2024 indicates that the company has improved its efficiency in generating sales from its total assets. This suggests that Lumentum has been optimizing both fixed and current assets to drive its revenue growth.

Overall, the trend in both fixed asset turnover and total asset turnover ratios demonstrates that Lumentum Holdings Inc has enhanced its efficiency in utilizing assets to generate sales, especially in the more recent years, which is a positive indicator of the company's operational performance.