MP Materials Corp (MP)

Short-term

Turnover ratios

Inventory turnover measures how efficiently a company manages its inventory by indicating how many times a company's inventory is sold and replaced over a period. From 2020 to 2023, MP Materials Corporation's inventory turnover decreased from 1.98 to 0.97, which may suggest a decrease in sales or an increase in inventory levels, potentially signaling inefficiency in inventory management.

Receivables turnover reflects how effectively a company collects outstanding receivables during a period. MP Materials Corporation's receivables turnover fluctuated significantly over the period, with a notable decrease in 2021 followed by a substantial increase in 2023. The rapid increase in receivables turnover in 2023 may indicate an improvement in the company's credit policies or collection processes.

Payables turnover measures how efficiently a company pays its suppliers. MP Materials Corporation's payables turnover improved from 1.28 in 2022 to 3.31 in 2023, indicating that the company has been paying its suppliers more frequently. However, the absence of payables turnover data for 2021 suggests that details regarding supplier payment trends remain unclear.

Working capital turnover illustrates how effectively a company utilizes its working capital to generate sales revenue. MP Materials Corporation's working capital turnover has exhibited slight fluctuations over the period. The decrease from 0.44 in 2022 to 0.25 in 2023 may suggest a decrease in sales relative to working capital employed, potentially indicating lower efficiency in utilizing working capital to generate revenue.

Overall, MP Materials Corporation's activity ratios provide insights into its inventory management, receivables collection efficiency, supplier payment trends, and working capital utilization. Monitoring these ratios can help stakeholders assess the company's operational performance and make informed decisions.

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Average number of days

Days of Inventory on Hand (DOH) measures how many days it takes for a company to sell its average inventory. A higher number indicates slower turnover of inventory. MP Materials Corporation's DOH has increased significantly over the years, reaching 374.72 days in 2023 from 184.63 days in 2020. This suggests that the company may be facing challenges in managing and selling its inventory efficiently.

Days of Sales Outstanding (DSO) indicates how long it takes for a company to collect on its sales. A lower DSO is preferable as it indicates faster collection of receivables. MP Materials Corporation's DSO has shown fluctuations over the years, with a significant decrease in 2023 to 14.44 days from 56.09 days in 2021. This improvement suggests that the company has become more efficient in collecting payments from its customers.

The Number of Days of Payables highlights the average number of days a company takes to pay its suppliers. A higher number of days implies that the company takes longer to pay its bills. MP Materials Corporation's payables period improved in 2023 to 110.21 days from 286.03 days in 2022. This indicates that the company may be managing its payables more effectively, potentially negotiating better credit terms with suppliers.

Overall, while MP Materials Corporation has been facing challenges in inventory management, it has shown improvements in collecting receivables and managing payables. Monitoring these activity ratios can provide insights into the company's operational efficiency and effectiveness in managing working capital.

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Long-term

The fixed asset turnover ratio for MP Materials Corporation has fluctuated over the past four years, from 0.27 in 2020 to a peak of 0.56 in 2022 before declining to 0.22 in 2023. This ratio measures the company's ability to generate revenue from its fixed assets, indicating that in 2022, MP Materials was efficient in utilizing its fixed assets to generate sales compared to the other three years.

On the other hand, the total asset turnover ratio has also varied, increasing from 0.13 in 2020 to 0.24 in 2022 before dropping to 0.11 in 2023. This ratio reflects how well the company generates sales from all its assets, including both fixed and current assets. The increase in total asset turnover from 2020 to 2022 suggests an improvement in the company's efficiency in utilizing its total assets to generate sales, but the decrease in 2023 indicates a decline in this efficiency compared to the previous year.

Overall, the long-term activity ratios for MP Materials Corporation show fluctuations in the efficiency of asset utilization over the four-year period, with varying levels of performance in converting both fixed assets and total assets into sales. Further analysis and consideration of industry benchmarks may be necessary to evaluate the company's asset management effectiveness comprehensively.