NewJersey Resources Corporation (NJR)

Short-term

Turnover ratios

NewJersey Resources Corporation's activity ratios provide insights into its efficiency in managing inventory, accounts receivable, accounts payable, and working capital.

Inventory Turnover: The inventory turnover has shown inconsistency over the past five years, with a significant fluctuation from 0.06 in 2022 to 0.48 in 2021. In 2024 and 2023, the ratio remained stable at 0.08, indicating a lower rate of inventory turnover. This suggests that the company is holding onto its inventory for a longer period, which may tie up capital and potentially lead to carrying costs.

Receivables Turnover: NewJersey Resources Corporation's receivables turnover has been relatively high and consistent over the five-year period, ranging from 17.07 to 25.32. A higher receivables turnover ratio indicates that the company is efficient in collecting payments from customers, which is a positive sign of effective credit management and liquidity.

Payables Turnover: The payables turnover ratio has been relatively low and consistent, ranging from 0.08 to 0.46 over the period. A low payables turnover ratio may suggest that the company takes longer to pay its suppliers, potentially signaling favorable credit terms or cash flow management.

Working Capital Turnover: The working capital turnover ratio was not provided for 2022 and earlier years but stood at 33.76 in 2020, indicating that for each dollar of working capital investment, the company generated $33.76 in revenue. This ratio can provide insights into the company's operational efficiency in utilizing its working capital to generate sales.

Overall, while the company's receivables turnover reflects efficient collection practices, the fluctuating inventory turnover and lower payables turnover may warrant further examination to optimize inventory management and supplier payment strategies for improved operational efficiency and cash flow management.

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Average number of days

The activity ratios for NewJersey Resources Corporation reveal the efficiency and effectiveness of the company in managing its inventories, accounts receivable, and accounts payable over the past five years.

1. Days of Inventory on Hand (DOH):
- The DOH has shown fluctuations over the years, ranging from as low as 756.76 days in 2021 to as high as 6,381.11 days in 2022. This ratio measures how many days, on average, the company holds its inventory before it is sold.
- The significant fluctuations in DOH indicate inconsistent inventory management practices during the period under review.

2. Days of Sales Outstanding (DSO):
- The DSO has varied over the years, with the lowest value of 14.41 days in 2023 and the highest value of 21.38 days in 2021. This ratio reflects the average number of days it takes for the company to collect its accounts receivable.
- While there have been fluctuations, it appears that the company has generally been able to collect its receivables within a reasonable timeframe.

3. Number of Days of Payables:
- The number of days of payables has also shown fluctuations, with the lowest value of 793.44 days in 2021 and the highest value of 4,455.06 days in 2020. This ratio measures the average number of days it takes the company to pay its suppliers.
- The significant variation in the number of days of payables suggests inconsistency in the company's payment practices to its vendors.

Overall, the analysis of activity ratios for NewJersey Resources Corporation indicates mixed performance in managing inventory levels, collecting accounts receivable, and paying suppliers efficiently. The company may benefit from implementing more consistent and effective strategies to improve its inventory turnover, accounts receivable collection, and accounts payable management to enhance its overall operational efficiency and financial performance.

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Long-term

The long-term activity ratios of NewJersey Resources Corporation, specifically the fixed asset turnover and total asset turnover, provide insights into the efficiency of the company in utilizing its assets to generate revenue.

The fixed asset turnover ratio has exhibited a declining trend over the past five years, from 3.72 in 2020 to 2.49 in 2024. This indicates that the company is generating less revenue per dollar of fixed assets invested. A lower fixed asset turnover ratio may suggest that the company is not effectively utilizing its fixed assets to generate sales, which could potentially be due to underutilization or inefficiency in managing these assets.

On the other hand, the total asset turnover ratio has also shown a decreasing trend, from 0.56 in 2020 to 0.34 in 2024. This ratio measures the company's ability to generate sales relative to its total assets. A declining total asset turnover ratio implies that the company is becoming less efficient in generating revenue from its total asset base over time.

Overall, the declining trends in both fixed asset turnover and total asset turnover ratios suggest that NewJersey Resources Corporation may be facing challenges in efficiently utilizing its assets to drive revenue growth. It is important for the company to closely monitor these ratios and implement strategies to improve asset utilization efficiency to enhance overall financial performance.