Otter Tail Corporation (OTTR)

Inventory turnover

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Cost of revenue	US$ in thousands	518,479	543,960	492,424	5,153	5,919
Inventory	US$ in thousands	149,701	145,952	148,490	92,165	97,851
Inventory turnover		3.46	3.73	3.32	0.06	0.06

December 31, 2023 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $518,479K ÷ $149,701K
= 3.46

Inventory turnover is a key financial ratio that indicates how efficiently a company is managing its inventory levels. It is calculated by dividing the cost of goods sold by the average inventory for a specific period.

Looking at the data provided for Otter Tail Corporation, we can see that the inventory turnover has fluctuated over the past five years. In 2023, the inventory turnover was 3.96, which decreased from the previous year's ratio of 4.85 in 2022. This suggests that in 2023, Otter Tail Corporation took longer to sell its inventory compared to the prior year.

However, when comparing the 2023 ratio to earlier periods, it is higher than the 2021 ratio of 4.13 but lower than the 2020 and 2019 ratios of 4.74 and 4.97, respectively. This indicates that although there was a decrease in inventory turnover from the previous year, Otter Tail Corporation was more efficient in managing its inventory in 2023 compared to 2021.

On a general note, a higher inventory turnover ratio signifies that a company is selling its goods more quickly and efficiently, which is often seen as a positive indicator. Conversely, a lower inventory turnover ratio may suggest overstocking, slow-moving inventory, or potential issues with the sales strategy. It is important for Otter Tail Corporation to continually monitor and manage its inventory levels to optimize its operations and profitability.