Neogen Corporation (NEOG)

Cash conversion cycle

		May 31, 2025	May 31, 2024	May 31, 2023	May 31, 2022	May 31, 2021
Days of inventory on hand (DOH)	days	147.19	150.07	117.27	157.12	145.05
Days of sales outstanding (DSO)	days	62.58	68.32	68.01	69.01	71.54
Number of days of payables	days	61.39	65.86	67.19	44.46	34.43
Cash conversion cycle	days	148.38	152.54	118.09	181.67	182.17

May 31, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 147.19 + 62.58 – 61.39
= 148.38

The cash conversion cycle (CCC) of Neogen Corporation demonstrates notable fluctuations over the period from May 2021 to May 2025. On May 31, 2021, the CCC was approximately 182.17 days, indicating the total number of days it takes for the company to convert its investments in inventory and other resources into cash flows from sales. This figure slightly decreased to 181.67 days by May 31, 2022, suggesting a marginal improvement in the efficiency of working capital management during that year.

A significant reduction is observed by May 31, 2023, when the CCC dropped to approximately 118.09 days. This reflects a substantial enhancement in the company’s operational efficiency, likely driven by improvements in inventory turnover, receivables collection, or payables management, resulting in a shorter cycle for cash conversion. However, in subsequent years, the CCC increased again to 152.54 days by May 31, 2024, and slightly declined to 148.38 days by May 31, 2025. These increases indicate periods where the company's working capital efficiency has slightly deteriorated compared to the 2023 low-point, potentially signifying longer periods for inventory turnover, receivables collection, or extended payables.

Overall, Neogen Corporation experienced a peak in its cash conversion cycle in 2021 and 2022, followed by a significant decline in 2023, after which the cycle increased again but did not return to the early 2021 levels. The trend suggests that, over the analyzed period, the company aimed for and achieved a period of operational improvement, though some volatility remains, highlighting variations in operational efficiency and working capital management.