Stepan Company (SCL)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 8.28 | 6.25 | 6.90 | 7.46 | 8.16 |
| Receivables turnover | 5.46 | 6.32 | 5.58 | 6.18 | 6.67 |
| Payables turnover | 9.44 | 6.69 | 6.52 | 6.90 | 8.55 |
| Working capital turnover | 9.45 | 7.38 | 5.67 | 3.81 | 3.85 |
Activity ratios provide insights into how efficiently a company is managing its assets and liabilities. Let's analyze Stepan Co.'s activity ratios based on the data provided:
Inventory turnover:
- Stepan Co.'s inventory turnover has been gradually increasing over the past five years, indicating that the company is selling its inventory more frequently. This can signify effective inventory management and a faster conversion of inventory into sales.
Receivables turnover:
- The receivables turnover shows a decreasing trend from 2019 to 2023. This suggests that it is taking the company longer to collect outstanding receivables, which could result in potential cash flow issues or credit risks.
Payables turnover:
- The payables turnover of Stepan Co. has been fluctuating but generally shows an increasing trend. A higher payables turnover implies that the company is paying its suppliers more frequently, which can be beneficial for managing working capital efficiently.
Working capital turnover:
- The working capital turnover ratio has shown a consistent increase over the years, indicating that Stepan Co. is generating more revenue relative to its working capital. This suggests improved utilization of resources and potentially better efficiency in managing its current assets and liabilities.
Overall, Stepan Co. appears to be performing well in terms of inventory and payables turnover, but there might be room for improvement in managing receivables. The increasing trend in working capital turnover suggests the company's ability to generate revenue efficiently with the resources at its disposal.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 44.08 | 58.41 | 52.87 | 48.91 | 44.72 |
| Days of sales outstanding (DSO) | days | 66.80 | 57.79 | 65.46 | 59.02 | 54.70 |
| Number of days of payables | days | 38.68 | 54.52 | 55.95 | 52.93 | 42.67 |
Stepping Co.'s activity ratios provide insights into the efficiency of the company's operations. The Days of Inventory on Hand (DOH) measures how many days it takes for the company to sell its inventory. The trend shows a decrease from 2019 to 2022, suggesting better inventory management. However, there was a slight uptick in 2023, indicating a potential buildup of inventory.
The Days of Sales Outstanding (DSO) reflects how long it takes for the company to collect payment from customers. The increase in DSO from 2019 to 2023 indicates a lengthening collection period, which could impact cash flow.
The Number of Days of Payables represents the average number of days it takes for the company to pay its suppliers. The decreasing trend from 2019 to 2021 suggests that the company is taking longer to settle payables, potentially preserving cash. However, there was a slight decrease in 2023, indicating improved payment times to suppliers.
Overall, the company may need to focus on managing inventory levels effectively, reducing the collection period from customers, and maintaining steady payment terms with suppliers to optimize its working capital and cash flow management.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 1.91 | 2.57 | 2.75 | 2.73 | 2.89 |
| Total asset turnover | 0.98 | 1.13 | 1.13 | 1.06 | 1.17 |
Stepan Co.'s long-term activity ratios provide insights into how efficiently the company is utilizing its assets to generate sales revenue. The fixed asset turnover ratio has exhibited a declining trend over the past five years, from 2.91 in 2019 to 1.93 in 2023. This indicates that the company is generating less revenue per dollar invested in fixed assets.
On the other hand, the total asset turnover ratio shows a fluctuating pattern, with a slight increase from 1.07 in 2020 to 1.14 in 2022 and 2021 before dropping to 0.98 in 2023. This ratio signifies the company's overall efficiency in generating sales relative to its total assets.
The declining trend in the fixed asset turnover ratio indicates that Stepan Co. may be facing challenges in efficiently utilizing its fixed assets to drive revenue growth. The fluctuation in the total asset turnover ratio suggests changes in the company's overall asset management efficiency over the years. Further analysis and comparison with industry benchmarks may provide additional insights into Stepan Co.'s long-term asset utilization performance.