Neogen Corporation (NEOG)

Short-term

Turnover ratios

Neogen Corp.'s activity ratios provide insight into the efficiency of the company's operations over the last five years.

The inventory turnover ratio has improved steadily from 2.58 in 2019 to 3.11 in 2023, indicating that the company is managing its inventory more effectively, turning over its inventory 3.11 times in 2023 compared to 2.58 times in 2019.

Similarly, the receivables turnover ratio has remained relatively stable, with a slight increase from 5.02 in 2019 to 5.37 in 2023. This suggests that Neogen Corp. is collecting its receivables efficiently, with the ability to convert its receivables into cash approximately 5.37 times in 2023, compared to 5.02 times in 2019.

On the other hand, the payables turnover ratio has declined significantly from 11.66 in 2019 to 5.43 in 2023. This indicates that the company is taking longer to pay its suppliers, which may impact its cash flow and relationships with suppliers.

Neogen Corp.'s working capital turnover ratio has shown improvement, increasing from 1.01 in 2019 to 1.87 in 2023. This suggests that the company is generating more revenue per dollar of working capital, indicating improved efficiency in its use of working capital.

Overall, the inventory turnover and receivables turnover ratios indicate improved efficiency in managing inventory and collecting receivables. However, the declining payables turnover ratio suggests a potential slowdown in payments to suppliers, and it's important for the company to carefully manage its cash flow and supplier relationships.

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Average number of days

To analyze Neogen Corp.'s activity ratios, we will use the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

Starting with DOH, the trend shows a decline in inventory turnover efficiency from 2019 to 2022, with the figure increasing to 157.12 days in 2022 before dropping to 117.27 days in 2023. This indicates that inventory turnover improved significantly in 2023.

Next, DSO indicates the average number of days it takes for Neogen Corp to collect revenue after a sale. The trend here reflects a slight improvement in 2023, with DSO decreasing to 68.01 days from 69.01 days in 2022.

Finally, the number of days of payables represents the average number of days it takes for Neogen Corp to pay its suppliers. The trend indicates an increase in the number of days of payables from 2019 to 2022, but a significant increase from 2022 to 2023, reaching 67.19 days.

In summary, Neogen Corp's activity ratios demonstrate improvements in inventory turnover and collection of receivables in 2023. However, there was an increase in the number of days of payables, which could represent a change in the company's payment practices.

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Long-term

The fixed asset turnover ratio for Neogen Corp. has shown a declining trend over the past five years, decreasing from 5.53 in 2019 to 4.14 in 2023. This indicates that the company's ability to generate sales from its fixed assets has weakened over time. On the other hand, the total asset turnover ratio has also exhibited a downward trend, dropping from 0.60 in 2019 to 0.18 in 2023. This suggests that Neogen Corp. has become less efficient at generating sales from its total assets. Overall, the declining trend in both ratios may signal potential inefficiencies in the company's long-term asset utilization and investment strategies.