Quanex Building Products (NX)

Short-term

Turnover ratios

The activity ratios of Quanex Building Products provide valuable insights into the efficiency of the company's operations over the past five years.

1. Inventory turnover: Quanex Building Products' inventory turnover has been decreasing over the past five years, indicating that the company is taking longer to sell its inventory. This may suggest that the company is carrying excess inventory or facing challenges in managing its stock levels efficiently.

2. Receivables turnover: The receivables turnover ratio shows a declining trend, implying that Quanex Building Products is taking longer to collect payments from its customers. This may raise concerns about the company's credit policies or the creditworthiness of its customers.

3. Payables turnover: The payables turnover ratio has been fluctuating but generally showing an upward trend, indicating that the company is taking longer to pay its suppliers. This could be a strategic move to improve cash flow management or a sign of potential financial distress if payments are being delayed.

4. Working capital turnover: The working capital turnover ratio has been decreasing over the years, suggesting that Quanex Building Products is becoming less efficient in generating sales revenue for every dollar of working capital investment. This may indicate inefficiencies in managing working capital or declining sales performance.

Overall, Quanex Building Products should closely monitor these activity ratios to identify areas for improvement in its operational efficiency, inventory management, accounts receivable and payable practices, and working capital utilization.

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Average number of days

The activity ratios for Quanex Building Products show trends over the past five years.

1. Days of Inventory on Hand (DOH):
- The DOH has been increasing steadily over the years, indicating that Quanex is taking longer to convert its inventory into sales.
- The increase in DOH implies a potentially inefficient inventory management process, leading to higher carrying costs and a risk of obsolescence.

2. Days of Sales Outstanding (DSO):
- The DSO has shown fluctuations with some periods of increase and decrease.
- A higher DSO suggests that Quanex is taking longer to collect payments from customers, potentially indicating credit risks or a need for improved collection efforts.

3. Number of Days of Payables:
- The days of payables have varied over the years but have generally decreased.
- A lower number of days of payables signifies that Quanex is paying its suppliers more quickly, which could indicate strong vendor relationships but may also lead to potential cash flow challenges if not managed effectively.

Overall, Quanex Building Products should address the increasing trend in DOH to improve its inventory management efficiency, work on stabilizing DSO to ensure timely collections, and carefully manage its payables to strike a balance between maintaining good supplier relations and optimizing cash flow.

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Long-term

Quanex Building Products' long-term activity ratios show varying levels of efficiency in utilizing its assets over the past five years. The fixed asset turnover ratio has fluctuated, starting at 4.63 in 2020, peaking at 6.77 in 2022, and then decreasing to 3.18 in 2024. This ratio suggests that the company generated $3.18 in sales for every dollar invested in fixed assets in 2024.

On the other hand, the total asset turnover ratio has shown a declining trend, from 1.23 in 2020 to 0.55 in 2024. This indicates that Quanex Building Products generated $0.55 of sales for every dollar invested in total assets in 2024.

Overall, the decreasing trend in the total asset turnover ratio implies that the company may be experiencing challenges in efficiently utilizing all its assets to generate revenue. In contrast, although the fixed asset turnover ratio also decreased in 2024, it exhibited a more fluctuating pattern over the years. Quanex Building Products should focus on optimizing its asset utilization to enhance its long-term operational efficiency and profitability.