Pentair PLC (PNR)

Pentair PLC's liquidity position, as reflected in its current ratio, has shown fluctuations over the past few years. The current ratio, which measures the company's ability to meet short-term obligations with its current assets, has generally been above 1, indicating that Pentair has, for the most part, had sufficient current assets to cover its current liabilities.

However, the current ratio has displayed some volatility, reaching its lowest point of 1.18 in September 2020 and its highest point of 1.90 in March 2024. This suggests variations in Pentair's short-term liquidity position over the period under review.

When looking at the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, Pentair's ability to meet its short-term obligations immediately is notably lower. The quick ratio has generally been below 1, indicating that the company may struggle to cover its short-term liabilities without relying on inventory.

The cash ratio, which specifically looks at the company's ability to cover its current liabilities with cash and cash equivalents, has also shown fluctuations. Pentair's cash ratio has ranged from 0.09 to 0.25, with the highest level observed in March 2020 and the lowest in September 2020.

Overall, while Pentair PLC has maintained a current ratio above 1, indicating overall healthy liquidity, the lower quick and cash ratios suggest a potential dependency on inventory and limitations in covering short-term obligations with cash alone. Monitoring these ratios over time can provide insights into Pentair's liquidity management and any potential liquidity risks the company may face.

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Additional liquidity measure

The cash conversion cycle of Pentair PLC, a measure of how long it takes for the company to convert its investments in inventory and other resources into cash inflows from sales, has fluctuated over the periods provided.

From March 31, 2020, to December 31, 2020, the cash conversion cycle remained relatively stable, ranging between 23.67 and 30.25 days. This indicated that Pentair was managing its inventory levels, accounts receivable, and accounts payable efficiently during this period.

However, from March 31, 2021, onwards, there was a notable increase in the cash conversion cycle, with figures reaching as high as 54.64 days by March 31, 2023. This extended cycle suggests potential inefficiencies in managing working capital and converting investments into cash in a timely manner.

Subsequently, there was a slight decline in the cash conversion cycle by December 31, 2024, to around 46.19 days. While an improvement from previous highs, the cycle duration still indicates room for optimization in the company's operational and financial processes to enhance cash flow efficiency.

Overall, the trend in Pentair's cash conversion cycle shows fluctuations over the years, with periods of efficiency and inefficiency in managing working capital and liquidity, highlighting the importance of monitoring and managing these metrics for sustained financial health and performance.