Mueller Water Products (MWA)

Short-term

Turnover ratios

The analysis of Mueller Water Products' activity ratios over the period from September 30, 2020, to September 30, 2024, reveals the following trends and insights:

Inventory Turnover:
The inventory turnover ratio experienced a decline from 3.91 in 2020 to 2.84 in 2024. The highest ratio was recorded in 2021 at 4.07, indicating relatively efficient inventory management during that year. The downward trend suggests a gradual decrease in the frequency with which inventory is sold and replaced, potentially indicating slower inventory movement or an increase in inventory levels relative to sales.

Receivables Turnover:
The receivables turnover ratio showed an increasing trend, rising from 5.33 in 2020 to 6.10 in 2024. This indicates that the company has become more efficient in collecting its receivables over time, with accounts receivable being converted to cash more quickly. The improvement suggests effective credit and collection policies, reducing the days outstanding and enhancing liquidity.

Payables Turnover:
The payables turnover ratio fluctuated over the period, decreasing from 9.45 in 2020 to 7.19 in 2022, then increasing again to 8.71 in 2023 before slightly declining to 7.79 in 2024. The overall trend reflects some variability in the company's payment practices to suppliers. The earlier decline may suggest a lengthening of payment periods or extended creditor terms, whereas the subsequent increases indicate a tightening of payment cycles or negotiation of shorter payment terms.

Working Capital Turnover:
The working capital turnover ratio increased from 2.26 in 2020 to a peak of 2.84 in 2022, then decreased to 2.61 in 2023 and further to 2.19 in 2024. This pattern indicates that the company was using its working capital more efficiently during 2022, but efficiency has declined afterward. The reduced ratio in recent years could imply either a rise in working capital levels without a proportional increase in sales or a decline in operational efficiency.

Summary of Trends:
Overall, Mueller Water Products demonstrates an improvement in receivables management, as evidenced by rising receivables turnover ratios. Conversely, inventory turnover has declined, indicating slower inventory movement or increased inventory levels. The fluctuations in payables turnover suggest changes in payment strategies, while the decline in working capital turnover ratio in recent years points to reduced efficiency in utilizing working capital. Taken together, these trends provide insights into shifts in the company's operational dynamics, emphasizing improved receivables efficiency but potential concerns regarding inventory management and overall working capital utilization.

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Average number of days

The analysis of Mueller Water Products' activity ratios over the specified period reveals notable trends in inventory management, receivables collection, and payable practices.

Days of Inventory on Hand (DOH):
From September 30, 2020, to September 30, 2024, the number of days inventory on hand increased from approximately 93.27 days to 128.69 days. This upward trend indicates a gradual lengthening of the inventory cycle, suggesting that the company is holding inventory for a longer period before sale or utilization. The increase, especially between 2022 and 2024, may reflect strategic inventory buildup, supply chain considerations, or slower inventory turnover.

Days of Sales Outstanding (DSO):
Over the same period, the DSO decreased from 68.45 days in 2020 to 59.83 days in 2024. This decline suggests an improvement in receivables collection efficiency, with the company able to collect payment from customers more quickly over time. The trend points toward enhanced credit and collection processes, which could positively impact cash flow and liquidity.

Number of Days of Payables:
The days of payables increased from 38.63 days in 2020 to 46.88 days in 2024. This escalation indicates that Mueller Water Products is delaying payment to suppliers for a longer period, possibly leveraging this extension to optimize working capital or manage cash flows more effectively.

Overall Interpretation:
The activity ratios depict a scenario where the company’s inventory holdings are growing longer, while receivables are being collected more swiftly, and payables are being extended. The increase in inventory days coupled with declining receivables days may imply efforts to improve operational efficiency and cash collections. However, the rising days of inventory could also signal buildup due to inventory management challenges or strategic stockpiling. The combination of these ratios suggests a focus on optimizing liquidity and working capital management, but it warrants further analysis to determine the implications on operational efficiency and potential risks associated with increasing inventory levels.

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Long-term

The analysis of Mueller Water Products' long-term activity ratios over the specified period reveals insights into its asset utilization efficiency. The fixed asset turnover ratio, which measures how effectively the company generates sales from its fixed assets, experienced a modest fluctuation from 3.80 in September 2020 to a peak of 4.14 in September 2022. This indicates an improvement in the efficiency of utilizing fixed assets during this period. However, by September 2023, the ratio reverted to 3.80, aligning with the level observed in 2020, suggesting a potential stabilization or slight decline in fixed asset utilization efficiency.

Conversely, the total asset turnover ratio demonstrated a consistent upward trend from 0.69 in September 2020 to 0.85 in September 2023, indicating an ongoing improvement in overall asset utilization efficiency. This ratio's continuous increase suggests that the company has become more effective in generating sales from its total asset base over this period. The slight decrease to 0.80 by September 2024 could imply a marginal reduction in total asset utilization efficiency or a change in asset composition or sales volume, though data for this year is unavailable.

Overall, the company's long-term activity ratios reflect an initial improvement in fixed asset efficiency followed by stabilization, combined with a steady enhancement in total asset utilization over the analyzed timeframe.