NewMarket Corporation (NEU)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.56 | 3.60 | 3.93 | 3.90 | 4.69 |
| Receivables turnover | 6.15 | 5.99 | 5.91 | 5.94 | 6.42 |
| Payables turnover | 9.01 | 8.32 | 7.96 | 8.24 | 9.60 |
| Working capital turnover | 3.93 | 3.54 | 3.49 | 3.41 | 3.78 |
NewMarket Corp.'s activity ratios provide valuable insights into how efficiently the company manages its inventory, receivables, payables, and working capital.
1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory during a specific period.
- NewMarket Corp.'s inventory turnover has fluctuated over the past five years, ranging from 3.36 to 4.26 times.
- In 2023, the inventory turnover ratio increased to 4.22, indicating that the company sold and replaced its inventory more efficiently compared to the previous year.
2. Receivables Turnover:
- The receivables turnover ratio reflects how quickly a company collects payments from its customers.
- NewMarket Corp.'s receivables turnover has remained relatively stable, ranging from 5.98 to 6.52 times over the past five years.
- In 2023, the receivables turnover slightly increased to 6.24, suggesting that the company improved its ability to collect payments from customers.
3. Payables Turnover:
- The payables turnover ratio measures how quickly a company pays its suppliers and creditors.
- NewMarket Corp.'s payables turnover has shown variations over the five-year period, with values between 7.35 and 8.73.
- In 2023, the payables turnover ratio increased to 8.33, indicating that the company took longer to pay its suppliers compared to the previous year.
4. Working Capital Turnover:
- The working capital turnover ratio evaluates how efficiently a company utilizes its working capital to generate revenues.
- NewMarket Corp.'s working capital turnover has fluctuated, ranging from 3.43 to 4.00 times over the past five years.
- In 2023, the working capital turnover increased to 4.00, suggesting that the company generated more revenue per dollar of working capital compared to the previous year.
Overall, NewMarket Corp. demonstrates varying levels of efficiency in managing its inventory, receivables, payables, and working capital over the years, with some improvements in certain areas in 2023.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 80.01 | 101.36 | 92.87 | 93.55 | 77.86 |
| Days of sales outstanding (DSO) | days | 59.39 | 60.93 | 61.75 | 61.45 | 56.83 |
| Number of days of payables | days | 40.53 | 43.87 | 45.84 | 44.31 | 38.04 |
Activity ratios help us assess how efficiently a company is managing its assets and operations. Let's analyze NewMarket Corp.'s activity ratios based on the provided data.
1. Days of Inventory on Hand (DOH): This ratio indicates the number of days it takes for the company to sell its entire inventory. A lower DOH is generally preferred as it suggests faster inventory turnover. NewMarket Corp.'s DOH has fluctuated over the past five years, with a decrease in 2019 followed by an increase in 2020 and then a decrease again in 2023. The company should focus on managing inventory levels effectively to ensure optimal turnover.
2. Days of Sales Outstanding (DSO): DSO reflects the average number of days it takes for a company to collect its accounts receivable. A lower DSO is advantageous as it indicates quicker collection of receivables. NewMarket Corp. has shown a slight increase in DSO over the years, indicating a longer time to collect sales proceeds. The company may need to review its credit policies or collection procedures to expedite cash flow.
3. Number of Days of Payables: This ratio signifies the average number of days it takes for a company to pay its suppliers. A longer payment period can be beneficial for cash flow management. NewMarket Corp. has experienced fluctuations in the number of days of payables, with an increasing trend seen over the past five years. Extending payment terms may provide the company with additional liquidity, but it is crucial to maintain good relationships with suppliers.
In summary, NewMarket Corp. should focus on optimizing its inventory turnover, enhancing accounts receivable collection efficiency, and strategically managing its payables to improve overall working capital management and operational efficiency. Monitoring these activity ratios regularly can help the company make informed decisions to enhance profitability and liquidity.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 4.06 | 4.12 | 3.42 | 3.00 | 3.39 |
| Total asset turnover | 1.15 | 1.13 | 0.91 | 1.03 | 1.14 |
The fixed asset turnover ratio for NewMarket Corp. has shown a slight decrease over the past five years, from 4.19 in 2022 to 4.12 in 2023. This indicates that the company generated $4.12 in sales for every dollar invested in fixed assets in 2023, compared to $4.19 in the previous year. Despite the decrease, the ratio remains relatively high, suggesting efficient utilization of fixed assets to generate revenue.
On the other hand, the total asset turnover ratio for NewMarket Corp. has fluctuated over the same period, with a low of 0.92 in 2021 and a high of 1.17 in 2023. This ratio measures the company's ability to generate sales from all its assets. The increase in the total asset turnover ratio from 1.15 in 2022 to 1.17 in 2023 indicates that the company was able to generate more revenue for each dollar of assets held in 2023.
Overall, the trend in both the fixed asset turnover and total asset turnover ratios suggests that NewMarket Corp. has been effectively managing its assets to generate sales, with a particularly strong performance in utilizing fixed assets to drive revenue. However, it is important for the company to continue monitoring and improving these ratios to ensure sustained efficiency in its long-term asset utilization.