Mercury Systems Inc (MRCY)

Short-term

Turnover ratios

Mercury Systems Inc's activity ratios provide insight into how efficiently the company is managing its inventory, receivables, payables, and working capital.

1. Inventory Turnover:
- The inventory turnover ratio has been gradually declining from 2.47 in 2020 to 1.91 in 2024. This suggests that Mercury Systems is taking longer to sell its inventory, which may indicate overstocking or slowing sales.
- The decreasing trend in inventory turnover warrants attention from management to address potential inventory management issues.

2. Receivables Turnover:
- Mercury Systems has shown consistent receivables turnover ratios above 6.5 over the past five years. This indicates that the company is efficient in collecting payments from customers.
- The increase in receivables turnover from 6.61 in 2020 to 7.50 in 2024 suggests an improvement in the efficiency of the company's credit policies and collection processes.

3. Payables Turnover:
- The payables turnover ratio fluctuated over the years, ranging from 6.01 to 11.24. A higher payables turnover ratio indicates that Mercury Systems is paying its suppliers more frequently, which may reflect good relationships with suppliers.
- The significant decrease in payables turnover from 11.24 in 2021 to 6.01 in 2022 might indicate a change in payment terms or supplier relationships.

4. Working Capital Turnover:
- The working capital turnover ratio has shown a decreasing trend from 1.88 in 2021 to 1.16 in 2024. This suggests that Mercury Systems is generating less revenue per dollar of working capital employed.
- The declining ratio indicates a potential inefficiency in utilizing working capital resources to generate sales, which may require the company to reevaluate its capital allocation strategies.

Overall, while Mercury Systems Inc demonstrates strong receivables turnover and relatively stable payables turnover, there are areas of concern regarding inventory management and working capital efficiency. Management should focus on optimizing inventory levels, maintaining effective credit policies, and improving working capital utilization to enhance overall operational efficiency and financial performance.

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Average number of days

Mercury Systems Inc's activity ratios indicate the efficiency of the company in managing its inventory, accounts receivable, and accounts payable.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows an increasing number of days required to sell inventory over the past five years, with a significant rise from 147.81 days in 2020 to 191.41 days in 2024. This suggests that inventory turnover has slowed down, which may tie up working capital and increase the risk of obsolescence.

2. Days of Sales Outstanding (DSO):
- The DSO ratio reflects the average number of days it takes for the company to collect revenue from credit sales. The trend in DSO has fluctuated over the years but remains relatively stable. The decrease from 55.18 days in 2020 to 48.70 days in 2024 indicates an improvement in the collection of accounts receivable, which is a positive sign for cash flow management.

3. Number of Days of Payables:
- The trend in the number of days of payables shows some variability. A significant increase from 34.76 days in 2020 to 60.71 days in 2022 was observed, suggesting that the company is taking longer to pay its suppliers. However, there was a decrease in 2024 to 46.28 days, possibly indicating better management of payables.

Overall, Mercury Systems Inc may need to focus on optimizing its inventory management to enhance efficiency, while maintaining a balance between collecting receivables promptly and managing payables effectively to support its liquidity and working capital position.

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Long-term

Mercury Systems Inc's long-term activity ratios reflect its effectiveness in managing fixed assets and total assets to generate revenue. The fixed asset turnover ratio has fluctuated over the past five years, ranging from 7.19 to 9.08. This ratio indicates that, on average, the company generates $7.19 to $9.08 in sales for every dollar invested in fixed assets. The decreasing trend in fixed asset turnover suggests a potential decrease in the efficiency of utilizing fixed assets to generate revenue.

On the other hand, the total asset turnover ratio has also shown a declining trend from 0.49 in 2020 to 0.35 in 2024. This ratio indicates that, on average, the company generates $0.35 to $0.49 in sales for every dollar invested in total assets. The decreasing total asset turnover implies that the company may be less effective in utilizing its total assets to generate sales over time.

Overall, the declining trend in both fixed asset turnover and total asset turnover ratios may raise concerns about Mercury Systems Inc's efficiency in utilizing its assets to drive revenue growth. Further analysis and comparison with industry benchmarks could provide deeper insights into the company's long-term asset management performance.