Neogen Corporation (NEOG)

Short-term

Turnover ratios

The analysis of Neogen Corporation's activity ratios over the period from May 2021 to May 2025 reveals notable trends in operational efficiency and asset management.

Inventory Turnover:
The inventory turnover ratio experienced fluctuations over the examined period. It declined from 2.52 in May 2021 to 2.32 in May 2022, indicating a slight decrease in inventory management efficiency. Subsequently, there was an improvement to 3.11 in May 2023, reflecting more effective inventory utilization. However, this ratio declined again to 2.43 in May 2024 before marginally rising to 2.48 in May 2025. The overall trend suggests periods of both inventory accumulation and improved turnover, with a net increase in efficiency during the later years compared to 2022.

Receivables Turnover:
Receivables turnover shows a consistent upward trend. Beginning at 5.10 in May 2021, it increased to 5.29 in May 2022, and further to 5.37 in May 2023. The ratio remained relatively stable in 2024 at 5.34 before reaching 5.83 in 2025. This upward movement indicates an improvement in the collection of receivables, reflecting potentially enhanced credit policies or more efficient receivables management.

Payables Turnover:
The payables turnover ratio exhibits a declining trend from 10.60 in May 2021 to 8.21 in May 2022, suggesting the company was paying its suppliers more quickly during this period. This ratio then continued to decline markedly to 5.43 in May 2023, and slightly increased to 5.54 in May 2024 before reaching 5.95 in May 2025. The gradual increase in 2024 and 2025 could indicate a slight elongation in payment periods or improved supplier relationships.

Working Capital Turnover:
The working capital turnover ratio shows a steady upward trend over the years. It increased from 0.87 in May 2021 to 0.96 in May 2022, with a substantial rise to 1.87 in May 2023. The ratio continued to improve to 2.13 in May 2024 and further to 2.22 in May 2025. The rising working capital turnover suggests an increasing efficiency in utilizing working capital to generate sales, reflecting better cash flow management and operational effectiveness.

Summary:
Overall, Neogen Corporation has demonstrated progress in receivables and working capital management, with consistent improvements in collection efficiency and asset utilization. Inventory management has seen periods of fluctuation but shows signs of improved efficiency in recent years. Conversely, payables turnover has decreased, indicating a possibly more conservative or strategic approach to supplier payments in recent periods. These ratios collectively point toward enhanced operational efficiency and prudent working capital management in the latter part of the analyzed period.

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Average number of days

The activity ratios for Neogen Corporation over the observed period reflect notable trends in inventory management, receivables collection, and payables' utilization.

Days of Inventory on Hand (DOH):
In 2021, the DOH was approximately 145 days, indicating the company held inventory for nearly five months before sale. This period increased to around 157 days in 2022, suggesting a buildup in inventory levels or slower turnover. However, a significant reduction occurred by 2023, with DOH falling to approximately 117 days, implying improved inventory efficiency or faster turnover rates. The subsequent years showed a slight increase again, with levels around 150 days in 2024 and approximately 147 days in 2025, indicating some stabilization but still remaining above the 2021 level.

Days of Sales Outstanding (DSO):
The DSO remained relatively stable from 2021 through 2023, ranging from approximately 71.54 to 68.01 days. A slight improvement is evident in 2025, where the DSO decreased to about 62.58 days. This decline suggests that Neogen has been enhancing its receivables collection processes, leading to quicker cash inflows from customers.

Number of Days of Payables:
The payables period increased significantly from 34.43 days in 2021 to 67.19 days in 2023, indicating that the company took longer to pay its suppliers, possibly to optimize working capital management. In 2024, the payables days slightly decreased to approximately 65.86 days but remained substantially higher than the 2021 level. This trend continued into 2025, with payables days decreasing further to about 61.39 days, reflecting a gradual shortening of the payables cycle, potentially due to improved supplier payment policies or cash flow considerations.

Overall Analysis:
The fluctuations in inventory days point to periods of inventory buildup and subsequent efficiency improvements. The notable reduction in inventory holding period in 2023 aligns with efforts to enhance operational efficiency. The consistent mild decrease in DSO over the years indicates improved receivables management, positively affecting cash flow. The expansion of payables days until 2023 suggests a strategic delay in payments to suppliers, with a trend toward shorter payables in subsequent years, which may signal a shift toward more balanced working capital management.

Together, these ratios depict a company actively managing its working capital components, with notable improvements in inventory turnover and receivables collection in recent years, while optimizing payables to maintain liquidity.

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Long-term

The analysis of Neogen Corporation’s long-term activity ratios indicates notable trends over the recent fiscal years, focusing on fixed asset turnover and total asset turnover.

Fixed Asset Turnover:
This ratio measures the company’s efficiency in utilizing its fixed assets to generate sales. Between May 31, 2021, and May 31, 2023, there was a slight increase from 4.66 to 4.77, suggesting a modest improvement in fixed asset utilization during this period. However, in the subsequent year, the ratio decreased to 4.14 by May 31, 2023, indicating a decline in the company's efficiency in leveraging its fixed assets to produce sales. The absence of data beyond May 31, 2023, limits further trend analysis, yet the observed decrease could imply capital asset underutilization or increased asset base without a proportional rise in sales.

Total Asset Turnover:
This ratio assesses overall asset efficiency in generating sales, including both fixed and current assets. From May 31, 2021, to May 31, 2022, the ratio experienced a slight uptick from 0.51 to 0.53, reflecting a marginal improvement in overall asset utilization. Conversely, in the following year, the ratio declined sharply to 0.18, and then showed gradual recovery, reaching 0.20 by May 31, 2024, and further increasing to 0.26 by May 31, 2025. This pattern suggests a significant drop in overall asset efficiency during 2022–2023, potentially due to increased asset investments, operational challenges, or sales not keeping pace with asset growth. The subsequent upward trend indicates a gradual recovery in asset utilization efficiency.

In summary, Neogen Corporation’s long-term activity ratios reveal a period of stability in fixed asset utilization with a recent decline, accompanied by a notable reduction in overall asset efficiency during 2022–2023 followed by signs of recovery. These trends may reflect strategic investments, operational adjustments, or external market conditions impacting asset productivity.