Powell Industries Inc (POWL)

Short-term

Turnover ratios

Analysis of Powell Industries, Inc.'s activity ratios provides insights into the company's management of its assets and liabilities. The inventory turnover, a measure of the efficiency of inventory management, has shown a declining trend from 14.73 in 2019 to 8.64 in 2023. This indicates a potential decrease in inventory efficiency, which could tie up more resources in inventory.

The receivables turnover, reflecting the efficiency of collecting outstanding receivables, has fluctuated over the years. The significant decrease from 7.36 in 2019 to 3.38 in 2023 suggests a lengthening collection period for receivables, which may warrant attention to improve accounts receivable management.

The payables turnover, representing the speed at which the company pays its suppliers, has fluctuated but generally increased over the years. This increase could indicate an improvement in the company's ability to handle payables, potentially leading to better cash flow management and supplier relationships.

The working capital turnover has shown fluctuations as well, but the overall trend has been positive, with an increase from 3.03 in 2019 to 3.09 in 2023. This suggests that the company is effectively using its working capital to generate sales, a positive indication of operational efficiency.

In conclusion, while the company has shown fluctuations in its activity ratios, there are opportunities for improvement in managing inventory, receivables, and payables to enhance operational performance and working capital efficiency.

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Average number of days

Based on the provided data, Powell Industries, Inc.'s activity ratios can be analyzed as follows:

1. Days of Inventory on Hand (DOH):
The DOH measures how long a company takes to sell its inventory. Powell Industries' DOH has been increasing over the past five years. This suggests that the company is holding onto its inventory for a longer period before selling it, which could tie up working capital and potentially lead to obsolescence or decreased inventory turnover.

2. Days of Sales Outstanding (DSO):
The DSO ratio indicates the average number of days it takes for a company to collect payment after making a sale. Powell Industries' DSO has been fluctuating over the years, with a significant increase in 2023 compared to the previous years. The higher DSO may indicate that the company's accounts receivable collection process has slowed down, potentially impacting the company's cash flow.

3. Number of Days of Payables:
This ratio reflects the average number of days it takes for a company to pay its suppliers. Powell Industries' days of payables have fluctuated over the years, with a noticeable decrease in 2022 compared to 2021, followed by a further decrease in 2023. The decreasing trend indicates that the company is taking fewer days to pay its suppliers, which could potentially strain its relationships with suppliers.

Overall, the analysis of Powell Industries' activity ratios suggests that the company needs to address its inventory management, accounts receivable collection process, and management of payables to optimize its working capital and improve overall efficiency in its operations.

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Long-term

The long-term activity ratios for Powell Industries, Inc. indicate the efficiency and effectiveness of the company's use of its fixed and total assets over the last five years. The fixed asset turnover has shown a consistent upward trend, increasing from 4.28 in 2019 to 7.16 in 2023. This suggests that the company has been generating more revenue from its fixed assets over time, reflecting improved efficiency in utilizing its long-term investments.

In contrast, the total asset turnover has experienced a gradual decline, decreasing from 1.11 in 2019 to 0.93 in 2023. This could indicate a decrease in the company's ability to generate sales in proportion to its total assets, implying a potential decrease in asset utilization efficiency.

Overall, while the fixed asset turnover reflects positive improvement in long-term asset utilization, the declining trend in the total asset turnover may suggest the need for Powell Industries, Inc. to reassess its overall asset management strategies. Further investigation into the underlying reasons for changes in asset turnover ratios may provide insights into the company's operational and strategic performance.