Lumentum Holdings Inc (LITE)

Lumentum Holdings Inc. has demonstrated a consistently strong liquidity position over the analyzed period, as evidenced by its current, quick, and cash ratios from June 30, 2021, through June 30, 2025.

The current ratio, which measures the company's ability to meet short-term obligations with its total current assets, has shown an upward trend, increasing from 3.67 in 2021 to a peak of 5.90 in 2024 before slightly declining to 4.37 in 2025. This indicates a robust liquidity cushion, with current assets well exceeding current liabilities across all periods, thereby implying low liquidity risk.

Similarly, the quick ratio, which assesses liquidity excluding inventory and other less liquid current assets, experienced growth from 3.25 in 2021 to a high of 4.02 in 2024, followed by a decrease to 2.87 in 2025. Despite the recent decline, the quick ratio remains significantly above 1, suggesting the company maintains a solid capacity to satisfy immediate liabilities without relying on inventory sales.

The cash ratio, the most conservative liquidity measure focused solely on cash and cash equivalents relative to current liabilities, fluctuated from 2.93 in 2021, peaking at 3.56 in 2022, and maintaining a generally high level throughout the period. It declined to 3.18 in 2023, then to 3.29 in 2024, before decreasing to 2.23 in 2025. Nonetheless, even in 2025, the cash ratio indicates that Lumentum holds more than twice the amount of cash necessary to cover its current liabilities, reflecting a substantial liquidity reserve.

Overall, the trend in these ratios suggests that Lumentum Holdings Inc. consistently maintains a strong liquidity position, with ample liquid assets to meet short-term obligations. The ratios' upward trend through 2024 signifies improved liquidity management, although the slight decline in 2025 warrants monitoring to ensure continued adequacy of liquidity buffers.

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Additional liquidity measure

The cash conversion cycle (CCC) of Lumentum Holdings Inc. has exhibited a notable upward trend from June 30, 2021, to June 30, 2025. Specifically, the data indicates an initial CCC of approximately 74.80 days as of June 30, 2021. Over the subsequent years, the cycle lengthened consistently, reaching approximately 92.73 days by June 30, 2022, and further increasing to approximately 123.71 days by June 30, 2023.

The trend persists into the following year, with the CCC extending to approximately 141.94 days as of June 30, 2024. This represents the highest recorded value within the observed period, signaling an elongation of the total time taken to convert investments in inventory and receivables into cash. However, in the subsequent period ending June 30, 2025, there is a slight decrease in the cycle length, bringing the CCC down to approximately 130.90 days.

This escalation in the cash conversion cycle over the years reflects longer durations for managing inventory turnover and receivables collection, or potentially both. The increase from around 75 days in 2021 to over 141 days in 2024 suggests that the company has experienced challenges or changes in operational efficiency, possibly due to shifts in sales terms, inventory management practices, or supply chain dynamics. The subsequent reduction in 2025 may indicate efforts to improve cash flow management or operational efficiencies.

Overall, the trend indicates a lengthening of the company's cash conversion cycle over the three-year span, with a slight improvement in 2025. This evolving pattern warrants a deeper investigation into underlying operational factors influencing inventory turnover and receivables collection to fully understand the implications for liquidity management and working capital strategy.