Penguin Solutions, Inc. (PENG)

Short-term

Turnover ratios

The activity ratios of Penguin Solutions, Inc. over the analyzed period present a nuanced picture of the company's operational efficiency in managing inventory, receivables, payables, and working capital.

Inventory Turnover:
The inventory turnover ratio exhibits significant fluctuation across the periods. It peaked at 6.30 times in November 2020 and has generally experienced a declining trend from the initial high of 5.56 times in August 2020, reaching lows around 3.12 times in November 2022. Subsequent periods show a modest recovery, with ratios rising again to above 5.0 in August 2024 (5.49) before decreasing to 3.57 in November 2024 and slightly increasing again to 5.19 in May 2025. This pattern indicates periods of both efficient inventory management and slower turnover, potentially reflecting inventory buildup or shifts in product demand.

Receivables Turnover:
Receivables turnover ratios have fluctuated, with an overall upward trend observed from the early period, reaching a peak of 7.32 in February 2023. Prior to that, ratios hovered between approximately 4.5 and 5.5, indicating moderate efficiency in collecting receivables. Post-peak, the ratio declines slightly to below 5.0 levels by August 2024, suggesting possible issues in collection efficiency or stretched credit terms.

Payables Turnover:
The payables turnover ratios show variability, with notable increases indicating faster payment cycles in specific periods. For example, there is a significant jump to 7.39 in February 2023 and 6.64 in May 2023 from earlier lower levels around 3.0 to 4.0. This suggests periods where the company accelerated its payments to suppliers, possibly to take advantage of early payment discounts or to improve supplier relationships. Conversely, ratios below 4.0 in many other periods suggest elongated payment cycles, which may enhance cash flow but could strain supplier relationships.

Working Capital Turnover:
The working capital turnover ratios reveal a declining trend over time. Starting around 4.09 in August 2020, the ratio gradually decreases to levels below 2.0 by late 2023 and remains low through early 2024. This decline suggests that the company is generating less revenue per dollar of working capital, possibly indicating reduced operational efficiency or increasing working capital levels relative to sales. A noteworthy decline occurs between November 2023 and February 2024, reaching as low as 1.73, indicating potential challenges in efficiently utilizing working capital.

Overall Assessment:
The ratios suggest periods of operational efficiency interspersed with intervals of reduced activity or managerial adjustments. The fluctuating inventory turnover points to changing inventory management effectiveness, while the receivables and payables ratios indicate varying cycles in collections and payments, reflecting strategic or operational decisions. The downward trend in working capital turnover suggests increasing capital deployment or facing challenges in maintaining operational efficiency. Collectively, these metrics underscore a dynamic operational environment, with opportunities for stabilization and improvement in asset management practices.

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Average number of days

The activity ratios of Penguin Solutions, Inc. exhibit notable fluctuations over the analyzed period, reflecting variations in inventory management, receivables collection, and payables policies.

Days of Inventory on Hand (DOH):
The DOH ratio demonstrates considerable volatility. It increased from approximately 65.67 days in August 2020 to a peak of 111.27 days in August 2021, indicating a period of slower inventory turnover. Following this peak, there was a decline to about 70.47 days in August 2022, signaling improved inventory efficiency. However, the ratio spiked again to 117.00 days in November 2022 before decreasing to approximately 66.50 days by August 2024. As of May 2025, the ratio stands at approximately 70.29 days. These shifts suggest periods of inventory buildup potentially linked to supply chain adjustments or strategic stockpiling, followed by deployment or reduction phases.

Days of Sales Outstanding (DSO):
The DSO reflects the company's receivables collection efficiency. It was around 70.22 days in August 2020, steadily declining to approximately 49.84 days in February 2023, indicating an improvement in collection cycles. Nonetheless, subsequent increases are observed, rising to about 91.47 days in February 2025. The early-year decline suggests periods of more efficient cash collection practices, while the later increase points to longer credit periods or delays in receivables collection.

Number of Days of Payables:
The payables period fluctuates significantly. It was around 90.51 days in August 2020, rising to over 131 days in August 2021, implying extended payment terms extended to suppliers. As of February 2023, the payables period drops sharply to roughly 49.42 days, possibly reflecting tighter payment management or favorable payment negotiations. From mid-2023 onwards, the payables period varies, reaching over 100 days in some periods (notably 102.73 days in May 2024), indicative of extended creditor payments, and then stabilizing at just over 92 days by February 2025.

Summary:
Overall, the activity ratios suggest that Penguin Solutions, Inc. has experienced periods of liquidity and operational adjustments. Inventory levels showed periods of buildup and reduction, correlating with strategic inventory management. Receivables collection improved notably until early 2023, then lengthened, possibly affecting cash flow. Meanwhile, payables periods have been inconsistent, with notable stretches of extended creditor terms, especially during periods of inventory and receivables fluctuation. These trends highlight strategic shifts in operational policies aimed at balancing liquidity, working capital, and supplier relationships.

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Long-term

Based on the data provided for Penguin Solutions, Inc., an analysis of the company's long-term activity ratios reveals the following patterns:

1. Fixed Asset Turnover:
- The data for the fixed asset turnover ratio is unavailable across all periods presented, indicating either a lack of fixed assets or that such assets are not a significant component of the company's operations during this timeframe. The consistent absence of this ratio suggests that fixed asset utilization is not a central aspect of Penguin Solutions’ operational efficiency.

2. Total Asset Turnover:
- The total asset turnover ratio exhibits notable fluctuations over the analyzed periods. Initially, from August 31, 2020, through February 28, 2021, the ratio remained relatively steady, averaging around 1.43 to 1.46, signaling efficient utilization of total assets to generate sales.
- Subsequently, there was a decline from May 31, 2021 (1.12) to August 31, 2021 (also 1.12), indicating a slight reduction in asset efficiency. The ratio increased somewhat in subsequent periods, reaching 1.27 in November 2021 and 1.21 in February 2022.
- From mid-2022 onwards, a consistent downward trend is observed. The ratio dropped to 0.96 in November 2022 and further declined to 0.70 by February 2024, reflecting decreasing efficiency in utilizing total assets to generate sales.
- In later periods, there is a modest recovery, with ratios rising to 0.73 in February 2025 and 0.74 in May 2025, yet they remain below initial levels observed in 2020–2021.

In summary, while Penguin Solutions demonstrated relatively high asset utilization early on, recent periods show a downward trend, suggesting declining efficiency in deploying total assets to produce revenue. The absence of fixed asset turnover data limits insights into fixed asset management, but overall, the company’s asset utilization efficiency has diminished over time, which could indicate increased asset base without a proportional increase in sales, or operational challenges in generating revenue from existing assets.