Plexus Corp (PLXS)

Short-term

Turnover ratios

The activity ratios of Plexus Corp. provide insights into the efficiency of the company's operations and management of working capital.

The inventory turnover ratio has shown a declining trend from 4.10 in 2019 to 2.44 in 2023. This indicates that the company's inventory is now being sold at a slower rate compared to previous years, which could potentially signify inventory management challenges or a shift in product mix.

On the other hand, the receivables turnover has shown a consistent increase, reaching 6.36 in 2023 from 6.48 in 2019, indicating that the company is collecting its receivables at a faster rate. This might signify effective credit management or an improvement in the collection process.

The payables turnover ratio has fluctuated over the years but has also shown an increasing trend, reaching 5.90 in 2023. This implies that the company is taking longer to pay its suppliers, which could reflect improved cash management practices but also potentially strains supplier relationships.

The working capital turnover has also exhibited a slight increase from 4.70 in 2019 to 4.90 in 2023, indicating that the company generated more revenue per dollar of working capital invested, showcasing an improved efficiency in the utilization of working capital.

Overall, while some of the activity ratios have shown positive trends, such as receivables and payables turnover, the declining inventory turnover may require further analysis to identify potential underlying issues affecting the company's operational efficiency and working capital management.

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Average number of days

To analyze Plexus Corp.'s activity ratios, we will examine the days of inventory on hand (DOH), days of sales outstanding (DSO), and number of days of payables for the past five years.

1. Days of Inventory on Hand (DOH):
The DOH measures how many days it takes for a company to sell its inventory. A higher DOH indicates that inventory is not efficiently managed, leading to potential obsolescence and storage costs. Plexus Corp.'s DOH has increased from 89.06 days in 2019 to 149.42 days in 2023, suggesting a significant increase in inventory holding period. This might indicate a need for improved inventory management to minimize carrying costs and improve cash flow.

2. Days of Sales Outstanding (DSO):
The DSO reflects the average number of days it takes for a company to collect revenue after a sale. A higher DSO implies that the company is taking longer to collect its receivables, potentially impacting cash flow. Plexus Corp.'s DSO has fluctuated over the years, reaching 70.65 days in 2022 and then decreasing to 57.35 days in 2023. The recent improvement in DSO is positive, as it suggests a more efficient collections process, leading to quicker cash conversion.

3. Number of Days of Payables:
This ratio indicates the average number of days a company takes to pay its suppliers. A higher number of days of payables implies that the company's suppliers are financing a portion of its operations. Plexus Corp.'s days of payables have fluctuated, reaching 84.88 days in 2022 and then decreasing to 61.85 days in 2023. The decreasing trend might indicate improved payment terms with suppliers, potentially enhancing cash flow and liquidity.

In summary, Plexus Corp. has experienced fluctuations in its activity ratios over the past five years. The increasing DOH signals a longer inventory holding period, necessitating better inventory management. The fluctuating DSO indicates changes in the efficiency of revenue collection, while the decreasing days of payables suggest potential improvements in supplier payment terms. These ratios collectively highlight the company's effectiveness in managing its working capital and operational efficiency.

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Long-term

The long-term activity ratios of Plexus Corp. reflect its ability to efficiently utilize its fixed and total assets to generate sales over the years.

The fixed asset turnover ratio has been relatively stable, ranging between 8.24 and 8.84 over the past five years. This indicates that Plexus Corp. is effectively using its fixed assets to generate sales, with a consistent level of efficiency in this aspect of its operations.

On the other hand, the total asset turnover ratio has shown some fluctuations, declining from 1.58 in 2019 to 1.27 in 2023. This suggests that Plexus Corp.'s overall ability to generate sales from its total assets has weakened over the years, indicating potential inefficiencies in the utilization of its total asset base.

In conclusion, while Plexus Corp. has maintained a strong efficiency in utilizing its fixed assets to generate sales, there are indications that its overall ability to generate sales from its total assets has declined. This trend warrants further investigation into the company's asset management and operational efficiency.