Penguin Solutions, Inc. (PENG)

The liquidity ratios of Penguin Solutions, Inc. over the specified periods reveal notable trends and stability in the company’s short-term financial health.

Current Ratio Analysis:
The current ratio has generally shown an upward trajectory from 1.97 on August 31, 2020, to a peak of 3.30 on February 29, 2024. This indicates a robust ability to meet short-term obligations with current assets, reflecting improved liquidity over time. After reaching a high point in early 2024, the ratio slightly declined to 2.62 by May 31, 2025, but remains above 2.0, signifying consistent liquidity strength and a comfortable buffer to cover current liabilities.

Quick Ratio Analysis:
Similarly, the quick ratio has exhibited an overall increasing trend, rising from 1.30 at the end of August 2020 to a peak of 2.37 on February 29, 2024. The quick ratio’s increase suggests improved liquidity, especially in the company’s most liquid assets (excluding inventory). During the latter part of 2024 and into 2025, the ratio stabilized around the 2.0 mark, illustrating sustained quick asset coverage of short-term liabilities.

Cash Ratio Analysis:
The cash ratio, which measures the most liquid assets, has shown significant growth from 0.53 in August 2020 to a peak of 1.74 in February 2024. This indicates that the company increasingly maintains sufficient cash and cash equivalents to cover short-term liabilities, reaching a point where cash alone can more than cover current obligations. Post-peak, the cash ratio decreased to 1.37 by February 2025 but remains comfortably above 1.0, further confirming strong liquidity.

Overall Summary:
The data demonstrates that Penguin Solutions, Inc. has maintained, and in some periods strengthened, its liquidity position over the analyzed timeframe. The consistent increase in current, quick, and cash ratios during the early periods signifies an improving ability to meet short-term liabilities, with ratios remaining well within safe and healthy limits. Slight fluctuations in the later periods still reflect a solid liquidity position, thereby enhancing the company’s financial stability and operational flexibility.

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Additional liquidity measure

The cash conversion cycle (CCC) of Penguin Solutions, Inc. exhibits considerable fluctuations over the analyzed period from August 2020 to May 2025. Initially, the CCC decreased from approximately 45.37 days in August 2020 to a low of 35.51 days in November 2020, indicating an improvement in working capital management during this phase. This trend was followed by a slight increase, reaching around 57.20 days by May 2021, reflecting a period of extended cash collection and inventory turnover cycles.

Between August 2021 and November 2021, the CCC remained relatively elevated, with values approaching 59.19 days, suggesting increased efficiency challenges or changes in receivables and inventory management. From this point onward, a gradual upward trend is observed, culminating in a peak of approximately 89.70 days in November 2022. This indicates a significant elongation in the overall cash cycle, potentially due to slower receivables collection, longer inventory holding periods, or extended payables deferral.

Following this peak, the CCC shows signs of reversion, decreasing to around 87.14 days by February 2023 and continuing a downward trend to approximately 46.10 days by May 2025. The reduction during this period suggests an improvement in the company's working capital cycle, possibly through enhanced receivables collection, inventory reduction efforts, or more efficient payables management.

Overall, the company's cash conversion cycle has experienced notable volatility, with periods of both efficiency gains and significant elongation. Such fluctuations highlight the dynamic nature of Penguin Solutions, Inc.'s operational and financial management strategies over the analyzed timeframe.