Lamb Weston Holdings Inc (LW)

Short-term

Turnover ratios

The activity ratios of Lamb Weston Holdings Inc over the past five years provide insights into the efficiency of the company's operations in managing inventory, receivables, payables, and working capital:

1. Inventory Turnover:
The inventory turnover ratio has been relatively stable over the past five years, ranging from 4.75 to 6.66. This indicates that Lamb Weston is efficiently managing its inventory by selling and replenishing stock multiple times in a year.

2. Receivables Turnover:
The receivables turnover ratio has also shown consistency, with values ranging from 7.42 to 11.07. This implies that the company is effective in collecting payment from its customers, with a higher turnover indicating a shorter time frame for collecting outstanding receivables.

3. Payables Turnover:
The payables turnover ratio has decreased over the years, ranging from 6.48 to 13.26. A decreasing trend may suggest that Lamb Weston is taking longer to pay its suppliers, which could impact relationships with vendors.

4. Working Capital Turnover:
The working capital turnover ratio has exhibited an increasing trend over the past five years, indicating improved efficiency in utilizing working capital to generate sales. The significant increase from 2.96 in 2020 to 13.87 in 2024 is a positive sign of enhanced operational efficiency.

Overall, Lamb Weston Holdings Inc has demonstrated strong performance in managing its inventory, receivables, and working capital, while the increasing payables turnover may warrant monitoring to ensure effective vendor relationships are maintained.

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Average number of days

Days of Inventory on Hand (DOH) for Lamb Weston Holdings Inc have been gradually increasing over the past five years, indicating that the company is holding onto inventory for a longer period before it is sold. This can tie up capital and increase holding costs for the company.

Days of Sales Outstanding (DSO) have shown some fluctuations over the years, but the trend seems to be relatively stable. A lower DSO indicates that the company is collecting its accounts receivable more quickly, which can improve cash flow and liquidity.

The Number of Days of Payables for Lamb Weston Holdings Inc has been increasing steadily over the years. This suggests that the company is taking longer to pay its suppliers, which can be a strategy to manage cash flow and working capital more efficiently.

Overall, a high DOH coupled with a relatively low DSO and increasing payables period may indicate that Lamb Weston Holdings Inc is potentially facing challenges in managing its inventory effectively while maintaining a healthy cash position through extending payable periods. Further analysis would be required to assess the impact of these activity ratios on the company's overall financial performance and operational efficiency.

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Long-term

Lamb Weston Holdings Inc's long-term activity ratios reveal important insights into the company's management of its assets over the past five years.

The fixed asset turnover ratio measures how efficiently the company generates sales from its fixed assets. From 2020 to 2024, Lamb Weston's fixed asset turnover ratio has fluctuated, ranging from a low of 1.81 in 2024 to a high of 2.57 in 2022. The decreasing trend in recent years may indicate that the company is not utilizing its fixed assets as effectively to generate sales.

On the other hand, the total asset turnover ratio reflects the efficiency of the company in generating sales from all of its assets. Despite minor fluctuations, the ratio has generally shown an upward trend over the period, increasing from 0.81 in 2020 to 0.88 in 2024. This suggests that Lamb Weston has been improving its overall asset utilization efficiency, although there is still room for further enhancement.

Overall, while Lamb Weston Holdings Inc has improved its total asset turnover ratio over the years, there seems to be a need for closer attention to optimizing the utilization of its fixed assets to enhance operational efficiency and profitability.