Pilgrims Pride Corp (PPC)

Short-term

Turnover ratios

Pilgrim's Pride Corp.'s activity ratios provide insights into the efficiency of the company's operations regarding its management of inventory, receivables, payables, and working capital turnover.

1. Inventory Turnover:
Pilgrim's Pride Corp. has maintained a relatively stable inventory turnover over the past five years, with a range between 7.47 and 8.51. This indicates that the company is effectively managing its inventory levels and turning over its inventory approximately 8 times a year on average.

2. Receivables Turnover:
The receivables turnover ratio has also remained stable, fluctuating between 13.44 and 14.88 over the last five years. This indicates that Pilgrim's Pride Corp. is efficient in collecting payments from its customers, with an average turnover of receivables around 14 times per year.

3. Payables Turnover:
The payables turnover ratio has varied between 10.14 and 12.08, showing that the company is managing its payables effectively. A higher turnover ratio suggests that the company is paying its suppliers more frequently, which can be advantageous in managing working capital.

4. Working Capital Turnover:
Pilgrim's Pride Corp.'s working capital turnover has fluctuated between 10.16 and 16.15 over the past five years. A higher working capital turnover indicates that the company is generating revenue efficiently from its working capital. The company's ability to generate sales relative to its working capital has shown some variability but has generally been strong.

Overall, Pilgrim's Pride Corp. demonstrates efficient activity ratios in managing its inventory, receivables, payables, and working capital turnover, which is essential for maintaining liquidity and operational efficiency in the long term.

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Average number of days

Activity ratios provide insight into how efficiently a company is managing its operations. Let's analyze Pilgrim`s Pride Corp.'s activity ratios based on the provided data:

1. Days of Inventory on Hand (DOH):
- The trend shows a slight increase in DOH from 2019 to 2022, indicating that the company is holding inventory for a longer period before selling it.
- However, in 2023, there was a slight decrease in DOH, which could indicate a better inventory management strategy compared to the previous year.

2. Days of Sales Outstanding (DSO):
- DSO measures how long it takes for the company to collect revenue after making a sale. A lower DSO is generally more favorable as it indicates quicker collection of cash.
- Pilgrim`s Pride Corp. has seen a fluctuating trend in DSO over the years. There was a slight increase in 2023 compared to the previous year, indicating a potential delay in receiving payments from customers.

3. Number of Days of Payables:
- This ratio measures how long it takes the company to pay its suppliers. A higher number of days of payables suggests that the company is taking longer to settle its obligations.
- Pilgrim`s Pride Corp. has shown variability in the number of days of payables over the years. Notably, there was a significant decrease in 2022 compared to 2021, but the ratio increased again in 2023.

Overall, Pilgrim`s Pride Corp. should aim to optimize its activity ratios to improve efficiency in managing inventory, collecting payments from customers, and settling payables to suppliers. Improvements in these areas can enhance the company's working capital management and overall financial performance.

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Long-term

Pilgrim's Pride Corp.'s long-term activity ratios, specifically the fixed asset turnover and total asset turnover, provide insights into the company's efficiency in generating sales relative to its asset base.

The fixed asset turnover ratio has been fluctuating over the past five years. In 2023, it stood at 5.50, a decrease from the previous year's 5.94. This indicates that Pilgrim's Pride generated $5.50 in sales for each dollar invested in fixed assets. The decreasing trend in the fixed asset turnover may indicate potential inefficiencies in utilizing fixed assets to generate revenue efficiently, possibly due to underutilization or obsolete equipment.

On the other hand, the total asset turnover ratio has also exhibited variability but generally shows a positive trend over the same period. In 2023, the total asset turnover ratio was 1.77, implying that the company generated $1.77 in sales for each dollar of total assets. This suggests that Pilgrim's Pride has been improving its overall efficiency in using all assets (both fixed and current) to drive sales.

Comparing the two ratios, the total asset turnover ratio reveals a more comprehensive view of the company's overall efficiency in asset utilization. The increasing trend in total asset turnover coupled with the fluctuating trend in fixed asset turnover suggests that Pilgrim's Pride might be diversifying its asset base or optimizing the utilization of its total assets more effectively.

In conclusion, while the fixed asset turnover ratio fluctuates, indicating potential challenges in optimizing fixed asset utilization, the total asset turnover ratio has shown improvement, reflecting better overall efficiency in utilizing all assets to generate sales. Pilgrim's Pride Corp. may benefit from further evaluating its fixed asset management strategies to enhance efficiency in the long run.