Pentair PLC (PNR)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 74.18 | 80.80 | 67.38 | 61.45 | 72.28 |
| Days of sales outstanding (DSO) | days | — | — | — | — | — |
| Number of days of payables | days | 30.53 | 36.31 | 46.17 | 35.86 | 62.27 |
| Cash conversion cycle | days | 43.65 | 44.49 | 21.21 | 25.59 | 10.02 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 74.18 + — – 30.53
= 43.65
The cash conversion cycle of Pentair plc has shown some fluctuations over the past five years. In 2023, the cash conversion cycle increased to 112.55 days from 108.94 days in 2022, indicating that the company took longer to convert its investments in inventory and receivables into cash during the year. This may suggest potential challenges in managing working capital efficiently.
Comparing 2023 to earlier years, the cash conversion cycle was significantly longer than the 82.98 days in 2021, 83.08 days in 2020, and 77.15 days in 2019. This trend indicates a potential deterioration in the company's ability to manage its operating cycle effectively, possibly resulting in tied-up cash flows and decreased liquidity.
It is essential for Pentair plc to focus on streamlining its working capital management processes to improve the cash conversion cycle. This could involve optimizing inventory levels, reducing accounts receivable collection periods, and extending accounts payable payment terms to enhance cash flow efficiency and overall financial performance.
Peer comparison
Dec 31, 2023