Otter Tail Corporation (OTTR)

Short-term

Turnover ratios

The activity ratios of Otter Tail Corporation provide insights into its efficiency in managing various aspects of its operations.

The inventory turnover ratio indicates how many times the company's inventory is sold and replaced over a given period. Otter Tail Corporation's inventory turnover has fluctuated over the years, with a noticeable decline from 4.97 in 2019 to 3.96 in 2023. This may suggest that the company is taking longer to sell its inventory or is carrying more inventory on hand.

The receivables turnover ratio measures how efficiently the company collects its receivables. Otter Tail Corporation's receivables turnover has shown some variability but generally it has remained relatively stable over the years. The decrease in the ratio from 10.11 in 2022 to 8.59 in 2023 could imply that the company is taking slightly longer to collect its receivables.

The payables turnover ratio indicates how quickly the company pays its suppliers. Otter Tail Corporation's payables turnover has also fluctuated over the years, but it has generally remained at reasonable levels. The increase in the ratio from 6.78 in 2022 to 6.28 in 2023 suggests that the company is taking longer to pay its suppliers compared to the previous year.

The working capital turnover ratio reflects how efficiently the company generates revenue from its working capital. Otter Tail Corporation's working capital turnover has also shown variability, with a significant decline from 14.12 in 2019 to 5.18 in 2023. This may indicate that the company's efficiency in generating revenue from its working capital has decreased over the years.

Overall, the analysis of Otter Tail Corporation's activity ratios suggests that the company may need to focus on improving its inventory management, collections, and payment processes to enhance its operational efficiency and financial performance.

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Average number of days

Analysis of Otter Tail Corporation's activity ratios based on the data provided indicates fluctuations in efficiency and management of the company's working capital over the past five years.

1. Days of Inventory on Hand (DOH):
- The DOH measures how efficiently inventory is managed by the company. It shows the average number of days that inventory is held before being sold.
- Otter Tail Corporation's DOH has shown variability over the period, ranging from 73.42 days in 2019 to 92.18 days in 2023.
- The increase in DOH from 2022 to 2023 suggests that inventory is being held for a longer period before being sold, which may tie up capital and impact cash flows.

2. Days of Sales Outstanding (DSO):
- DSO measures the average number of days it takes the company to collect accounts receivable. A lower DSO indicates quicker collection of receivables.
- Otter Tail Corporation's DSO has fluctuated over the years, with the lowest being 36.09 days in 2022 and the highest at 53.36 days in 2021.
- The increase in DSO in 2021 suggests that the company took longer to collect receivables, which could impact cash flow and liquidity.

3. Number of Days of Payables:
- This ratio shows the average number of days it takes the company to pay its suppliers. A higher number indicates the company is taking longer to pay its suppliers.
- Otter Tail Corporation's days of payables have shown variability, ranging from 53.80 days in 2022 to 109.19 days in 2020.
- A significant increase in days of payables from 2020 to 2021 suggests the company extended its payment period, which could improve cash flow but may strain relationships with suppliers.

Overall, Otter Tail Corporation's activity ratios reflect fluctuations in managing working capital components like inventory, receivables, and payables over the years. It is essential for the company to closely monitor these ratios to ensure efficient cash flow management and maintain healthy relationships with stakeholders.

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Long-term

The long-term activity ratios for Otter Tail Corporation over the past five years show a fluctuating trend in efficiency in utilizing fixed assets and total assets to generate sales.

The fixed asset turnover ratio, which measures how effectively the company is utilizing its fixed assets to generate revenue, has varied over the years. In 2023 and 2021, the fixed asset turnover ratio was 0.56, indicating that for every dollar invested in fixed assets, the company generated $0.56 in sales. This ratio decreased to 0.43 in 2020 and then increased to 0.66 in 2022 before dropping back to 0.56 in 2023. The fluctuations in this ratio suggest that the company's efficiency in using fixed assets to generate sales has been inconsistent.

Similarly, the total asset turnover ratio, which assesses the company's ability to generate revenue from all its assets, also displays fluctuations. In 2023 and 2021, the total asset turnover ratio stood at 0.42, implying that for every dollar of assets, the company generated $0.42 in sales. This ratio increased to 0.50 in 2022 before dropping to 0.35 in 2020 and then recovering to 0.40 in 2019.

Overall, the variability in both the fixed asset turnover and total asset turnover ratios suggests that Otter Tail Corporation has experienced ups and downs in its efficiency in utilizing assets to drive sales over the past five years. Further analysis and comparison with industry benchmarks may provide more insights into the company's asset utilization efficiency.