Quanta Services Inc (PWR)

Short-term

Turnover ratios

Activity ratios provide insights into how efficiently a company is managing its resources and operations. Let's analyze Quanta Services, Inc.'s activity ratios based on the data provided:

1. Inventory Turnover:
Quanta Services, Inc.'s inventory turnover has gradually decreased over the past five years. A high inventory turnover ratio indicates that the company is effectively managing its inventory levels and quickly converting inventory into sales. However, the decreasing trend suggests that the company may be carrying more inventory relative to its sales, which could tie up capital.

2. Receivables Turnover:
The receivables turnover ratio measures how efficiently a company is collecting on its credit sales. Quanta Services, Inc.'s receivables turnover has remained relatively stable over the years. A higher ratio signifies that the company is collecting its accounts receivables quickly, while a lower ratio may indicate potential issues with collecting payments from customers.

3. Payables Turnover:
The payables turnover ratio represents how quickly a company pays off its suppliers. Quanta Services, Inc.'s payables turnover has exhibited a decreasing trend, indicating that the company is taking longer to pay its suppliers. A lower ratio could imply that the company is conserving cash or negotiating more favorable payment terms with suppliers.

4. Working Capital Turnover:
The working capital turnover ratio measures how efficiently a company is utilizing its working capital to generate sales. Quanta Services, Inc.'s working capital turnover has shown a slight increasing trend over the years, indicating that the company is generating more sales per dollar of working capital. A higher ratio suggests efficient utilization of resources to drive revenue growth.

In summary, Quanta Services, Inc. should monitor its inventory levels to improve efficiency, maintain steady receivables turnover for timely collections, evaluate payables management strategies for optimal cash flow, and continue to enhance working capital turnover to drive sales growth.

---

Average number of days

Quanta Services, Inc.'s activity ratios indicate how efficiently the company manages its inventory, receivables, and payables.

1. Days of Inventory on Hand (DOH):
- Quanta's DOH has been increasing over the last few years, from 1.93 days in 2019 to 3.57 days in 2023. This suggests that the company is holding onto its inventory for a longer period before it is sold. It could be due to changing market conditions or production inefficiencies.

2. Days of Sales Outstanding (DSO):
- Quanta's DSO has fluctuated over the years, ranging from 77.10 days in 2023 to 95.62 days in 2021. A higher DSO indicates that the company takes longer to collect payments from its customers, potentially impacting cash flow. The recent decrease in DSO from 95.62 days in 2021 to 77.10 days in 2023 is a positive sign of improved receivables management.

3. Number of Days of Payables:
- The number of days of payables has varied, with an increasing trend from 27.73 days in 2019 to 41.24 days in 2023. This suggests that Quanta is taking longer to pay its suppliers, which can be a strategy to manage cash flow or negotiate better terms.

Overall, Quanta Services, Inc. should closely monitor its activity ratios to ensure optimal efficiency in managing its working capital and operations. An increase in DOH and DSO could tie up cash flow, while extending payables may strain supplier relationships. Efficient management of these ratios is crucial for the company's financial health and growth prospects.

---

Long-term

Quanta Services, Inc.'s long-term activity ratios reflect the efficiency with which the company is utilizing its assets to generate revenue.

The fixed asset turnover ratio has shown a generally increasing trend from 2019 to 2023, indicating that the company is generating more revenue relative to its investment in fixed assets. The ratio increased from 8.73 in 2019 to 8.94 in 2023. This suggests that Quanta Services has been able to efficiently utilize its long-term assets to generate sales over the years.

On the other hand, the total asset turnover ratio has fluctuated during the same period, with a peak in 2020 before declining in subsequent years. The ratio decreased from 1.45 in 2019 to 1.29 in 2023. This could imply that Quanta Services is becoming less efficient in generating sales relative to its total assets.

Overall, while the fixed asset turnover ratio shows a positive trend in asset efficiency, the declining total asset turnover ratio raises some concerns about the company's overall asset utilization and effectiveness in generating revenue. Monitoring these ratios over time can provide insights into Quanta Services' operational efficiency and financial performance.