Neogen Corporation (NEOG)

The liquidity ratios of Neogen Corporation from May 2021 through May 2025 demonstrate notable trends in the company's ability to meet short-term obligations. The current ratio, which measures the company's capacity to cover current liabilities with its total current assets, shows a consistent decline over the observed period. It decreased from 11.03 in May 2021 to 8.05 in May 2022, further declining to 4.03 in May 2023, then to 3.82 in May 2024, and reaching 3.32 in May 2025. Although still significantly above the generally accepted safe threshold of 1.0, indicating that current assets have historically exceeded current liabilities, the steady decrease suggests a reduction in liquidity cushion over time.

Similarly, the quick ratio, which excludes inventory from current assets to provide a more stringent measure of liquidity, followed a comparable declining pattern. It fell from 14.52 in May 2021 to 10.50 in May 2022, then declined more sharply to 2.74 in May 2023, and remained low at 2.23 in May 2024, with further reduction to 1.62 in May 2025. Despite the decline, the ratio remains above 1.0, implying that the company generally maintains sufficient liquid assets (excluding inventory) to meet immediate liabilities, but the margin has diminished considerably.

The cash ratio, which assesses only cash and cash equivalents relative to current liabilities, exhibited a more dramatic decline. It decreased from 12.81 in May 2021 to 9.22 in May 2022, then markedly fell to 1.69 in May 2023, followed by further decreases to 1.11 in May 2024 and 0.74 in May 2025. The dropping cash ratio indicates a significant reduction in the most liquid assets, with the ratio falling below 1.0 in the latest year, which could be perceived as a potential concern for immediate liquidity position.

In summary, Neogen Corporation's liquidity ratios have exhibited a persistent downward trend over the analyzed period, reflecting a gradual erosion of the company's short-term liquidity buffer. While the ratios remain above critical thresholds, the consistent decline suggests increased reliance on other sources of liquidity and a potential need for close monitoring of cash flow management to ensure ongoing ability to meet short-term obligations.

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Additional liquidity measure

The cash conversion cycle (CCC) of Neogen Corporation has exhibited notable fluctuations over the period from May 31, 2021, to May 31, 2025. As of May 31, 2021, the CCC stood at approximately 182.17 days, indicating the company took nearly six months to convert its investments in inventory and receivables into cash, while accounting for the duration of its payables.

By May 31, 2022, the CCC remained relatively stable at approximately 181.67 days, showing minimal change and suggesting a consistent cycle in managing inventory, receivables, and payables during this period.

A significant reduction occurred by May 31, 2023, when the CCC dropped sharply to approximately 118.09 days. This decline indicates an improvement in the company's efficiency, likely due to shorter collection periods, faster inventory turnover, or extended payables, resulting in a cycle roughly four months shorter than the previous year.

However, subsequent data points show an increase in the CCC, reaching around 152.54 days by May 31, 2024, and slightly decreasing again to approximately 148.38 days by May 31, 2025. These increases suggest periods where the company's cash conversion process lengthened, possibly due to changes in credit terms, inventory strategies, or other operational factors.

Overall, the trend reflects a significant reduction in the cash conversion cycle in 2023 followed by partial lengthening in the following years. The initial decline indicates enhanced operational efficiency in managing working capital, while the subsequent increases may point to strategic adjustments or external influences affecting the cash flow cycle.