Premier Inc (PINC)

Short-term

Turnover ratios

The analyzed activity ratios for Premier Inc over the specified periods reveal insights into the company's operational efficiency and working capital management.

Inventory Turnover:
The inventory turnover ratio shows a general upward trend from 3.45 times as of September 30, 2020, reaching a peak of approximately 6.24 times by September 30, 2023. This increase indicates improved inventory management, with the company turning over its inventory more frequently within a given period. The ratios below 4 in 2020 and 2021 suggest relatively slower inventory turnover, while the upward movement post-2021 reflects greater efficiency in inventory utilization, possibly driven by operational improvements or demand shifts.

Receivables Turnover:
Receivables turnover exhibits a declining trend over time, starting at approximately 3.57 times in September 2020 and decreasing to about 2.43 times by June 2025. This decline signifies that the company is taking longer to collect receivables, which could impact cash flow and liquidity. The slight fluctuations within this downward trend indicate periods of marginal improvement but generally denote a gradual easing in collection efficiency.

Payables Turnover:
The payables turnover ratio demonstrates fluctuations, with notable peaks such as 12.90 times in March 2022 and significant increases later in 2024, reaching approximately 18.08 times by December 2024. These high ratios suggest that Premier Inc may be delaying payments to suppliers or negotiating longer payment terms, thereby stretching payables. Conversely, periods of lower ratios reflect quicker settlement of payables. The fluctuations indicate responsiveness to operational cash flow considerations or supplier relationship strategies over time.

Working Capital Turnover:
This ratio displays considerable variability. It increased sharply from 26.89 times on September 30, 2020, to a high of 43.54 times on March 31, 2021, reflecting efficient utilization of working capital during that period. The exceptional spike at the end of 2021 (332.31 times) may indicate a seasonal effect or a data anomaly; subsequent periods show a decline and stabilization with ratios between approximately 4.44 and 20.65, suggesting fluctuating levels of working capital efficiency. The ratios point to periods of tight working capital management and periods where less efficient utilization might have occurred.

Overall, these activity ratios together portray a company progressively improving its inventory management efficiency, experiencing a gradual slowdown in receivables collection, fluctuating payment behaviors with suppliers, and variable working capital utilization. These trends are indicative of dynamic operational strategies that respond to market conditions, supply chain relationships, and internal management priorities.

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Average number of days

The activity ratios for Premier Inc., focusing on inventory management, receivables collection, and payables payments, display notable trends over the period analyzed.

Days of Inventory on Hand (DOH):
From September 2020 to March 2021, DOH was relatively stable, fluctuating slightly around approximately 105 days. A significant decline commenced around June 2021, where DOH decreased sharply from about 73 days to roughly 69-70 days in September 2021, and further decreased to approximately 66 days by the end of 2021. During 2022, the DOH was variable, rising again to near 89 days by September 2022 before declining to about 61 days by March 2024, with a slight uptick to around 61 days in June 2024. The overall trend indicates improved inventory efficiency, especially from mid-2021 onward, as inventory is held for shorter periods.

Days of Sales Outstanding (DSO):
Initially stable in late 2020, with DSO around 102 days, the metric gradually increased through 2021 and 2022, reaching over 108 days by December 2022, and crossing 110 days by March 2023. The upward trend persisted into 2024, with DSO rising beyond 130 days, peaking at approximately 144 days in December 2024. This pattern suggests a weakening in receivables collection efficiency, with longer periods needed to convert receivables into cash, particularly notable from late 2022 onwards.

Number of Days of Payables:
Payables days exhibited fluctuations throughout the period. Initially, payables days ranged from about 50 days in September 2020, peaking at nearly 57 days by December 2020, then decreasing to approximately 28-36 days during 2021. From 2022 onward, payables days generally increased again, reaching over 50 days in March 2024, with notable reductions to around 20 days in early 2024. The shorter periods in late 2024 suggest a more aggressive approach to settling payables, whereas earlier periods reflect extended credit periods from suppliers.

Summary of Trends:
Overall, Premier Inc. demonstrated improved inventory turnover, with DOH decreasing substantially from over 105 days to about 61 days by mid-2024, indicating better inventory management. Conversely, receivables collection efficiency declined, as shown by the rising DSO, especially evident from late 2022 through 2024, implying longer collection periods. Payables management exhibited variability, with periods of extended payment terms interspersed with more prompt payments; notably, some periods saw payables days drop to as low as 20 days, possibly reflecting improved liquidity or strategic payment practices. These activity ratio trends collectively suggest enhanced inventory handling but potentially increasing challenges in receivables collection, which may affect liquidity management strategies moving forward.

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Long-term

The long-term activity ratios for Premier Inc, specifically the Fixed Asset Turnover and Total Asset Turnover ratios, depict distinct patterns over the analyzed period.

Fixed Asset Turnover Ratio:
This ratio measures how efficiently the company utilizes its fixed assets to generate sales. Throughout the period, it showed notable fluctuations, beginning at 6.28 as of September 30, 2020. The ratio increased to 6.56 by December 31, 2020, and further to 7.07 on March 31, 2021, indicating improved utilization of fixed assets. However, in subsequent quarters, the ratio experienced some volatility: declining to 6.32 in June 2021, slightly rising to 6.38 in September 2021, and maintaining around similar levels into December 2021 (6.29). The peak observed at 7.07 was repeated by March 31, 2022, but then the ratio declined to 5.67 by June 30, 2022, and remained relatively stable through September 2022 at approximately 5.62. The ratio increased again to 6.58 at the end of 2022, with a slight decrease to 6.47 in March 2023 and further to 6.29 by June 2023. The data for subsequent quarters remains unavailable, limiting trend analysis beyond mid-2023.

Total Asset Turnover Ratio:
This ratio assesses the efficiency with which total assets generate sales. It started at 0.39 as of September 30, 2020, and demonstrated a gradual upward trend, reaching 0.41 at the end of 2020, and 0.43 by March 2021. The ratio increased to 0.49 in June and September 2021, maintaining a relatively stable higher level into December 2021. Post-2021, the ratio depicts a slight downward trend: decreasing to 0.45 in March 2022 and further to 0.43 by June 2022. From there, it declined progressively, reaching 0.40 in September 2022, and 0.38 by December 2022. The ratio stabilized somewhat in 2023, fluctuating between 0.35 and 0.38, ending at 0.36 in June 2024. The data for later quarters remains unavailable for analysis.

Summary:
Overall, Premier Inc’s fixed asset turnover has demonstrated fluctuations suggestive of operational efficiency improvements at certain times, notably peaking in early 2021 and again at the end of 2022, before declining or stabilizing. The total asset turnover trend shows an initial improvement followed by a gradual decline, indicating that the company's overall asset utilization efficiency has slightly diminished over time. These patterns may reflect changes in asset base, strategic shifts, or operational adjustments, but without further context or accompanying data such as sales figures or asset composition, detailed conclusions remain limited.