O’Reilly Automotive Inc (ORLY)

Inventory turnover

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cost of revenue	US$ in thousands	12,631,100	11,467,800	10,427,900	9,193,860	8,231,160
Inventory	US$ in thousands	4,658,370	4,359,130	3,686,380	3,653,200	3,454,090
Inventory turnover		2.71	2.63	2.83	2.52	2.38

December 31, 2023 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $12,631,100K ÷ $4,658,370K
= 2.71

O`Reilly Automotive, Inc.'s inventory turnover has shown a generally stable trend over the last five years, with values ranging from 1.38 to 1.71. The inventory turnover ratio indicates how many times a company's inventory is sold and replaced over a specific period. A higher turnover ratio is generally favorable as it suggests efficient management of inventory and faster sales.

In particular, the inventory turnover ratio increased from 1.38 in 2019 to 1.71 in 2021 before slightly decreasing to 1.65 in 2021. This uptrend followed by a slight dip can indicate improved efficiency in managing inventory levels and sales processes between 2019 and 2021, although the drop in 2023 may need further scrutiny.

Overall, it is essential for O`Reilly Automotive, Inc. to maintain a balance in its inventory turnover ratio to ensure it is neither carrying excess inventory nor experiencing stockouts. An analysis of the underlying reasons for fluctuations in inventory turnover can provide insights into the company's operational efficiency and effectiveness in managing its inventory levels.