Neogen Corporation (NEOG)

The liquidity ratios of Neogen Corporation over the analyzed period indicate significant variability and a broad decline in short-term liquidity positions from 2020 through 2025.

The Current Ratio, which measures the company's ability to cover current liabilities with its current assets, was consistently high in 2020 and early 2021, peaking at nearly 13 in November 2020. Throughout late 2021 and into 2022, this ratio began a gradual decline, falling below 10 in November 2022 and reaching approximately 3.5 to 4.4 by late 2023 and mid-2024. The sustained decrease suggests a tightening of liquidity, with assets available to cover current liabilities diminishing over time. Despite the decline, the ratio generally remained above 3 through most of 2024, indicating a still relatively adequate but narrowing buffer.

The Quick Ratio, which refines liquidity assessment by excluding less liquid assets like inventory, followed a similar downward trend. It peaked at over 16 in late 2020 and early 2021, then declined considerably, especially after 2022, dropping below 3 in late 2022. By early 2024, the Quick Ratio stabilized around 2.0 to 2.3, reflecting a decreased capacity to meet short-term obligations solely with liquid assets excluding inventory.

The Cash Ratio, representing the most conservative liquidity measure based solely on cash and cash equivalents, also exhibited a consistent downward trajectory. It initially was above 14 in late 2020, then declined sharply, especially after November 2022, falling to below 1 in late 2022 and remaining near or below 1 through early 2025. This indicates that Neogen's cash holdings alone have become less sufficient relative to current liabilities, highlighting a potential liquidity concern if other liquid assets do not compensate.

Overall, these ratios illustrate a gradual erosion of Neogen Corporation's short-term liquidity position over the observed period. The decline across all three ratios signals increasing challenges in meeting short-term obligations with liquid assets and may warrant closer scrutiny of working capital management and cash flow strategies to ensure ongoing liquidity adequacy.

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Additional liquidity measure

The analysis of Neogen Corporation's cash conversion cycle (CCC) over the period from August 2020 to May 2025 reveals notable fluctuations and underlying trends. Initially, the CCC was relatively high, oscillating around 180 to 190 days during 2020 and early 2021, indicating longer durations for inventory turnover, receivables collection, and payables deferral.

From late 2021 onward, there was a discernible downward trend in the CCC. Notably, the cycle decreased sharply from approximately 165 days in November 2021 to around 118 days in May 2023, reflecting improved liquidity management and operational efficiencies. The most substantial reduction occurred between November 2022 and May 2023, where the CCC dropped from approximately 144 days to 118 days. This period likely signifies enhancements in inventory turnover rates, faster receivables collection, and optimized payment terms.

Subsequent data indicates some volatility with increases and decreases in the CCC. In August 2023, the CCC increased to nearly 95 days but then rose again in subsequent quarters, reaching approximately 159 days in November 2024 before slightly decreasing again by May 2025 to around 148 days. These variations suggest ongoing adjustments in inventory management, receivables, and payables policies, possibly influenced by market conditions or strategic shifts.

Overall, the trend from 2020 through mid-2023 demonstrates a significant reduction in the CCC, indicative of improved working capital management. The subsequent fluctuations suggest a period of operational realignment or response to external factors, with the company maintaining a generally shorter cycle than in the early years. This progressive shortening of the cash conversion cycle enhances the firm's liquidity position, accelerates cash flows, and reflects efficient operational practices.