Stepan Company (SCL)

Short-term

Turnover ratios

Based on the provided data, let's analyze the activity ratios of Stepan Company:

1. Inventory Turnover:
- The inventory turnover ratio measures how efficiently a company manages its inventory. Stepan Company's inventory turnover has fluctuated over the years, ranging from a low of 5.83 in 2022 to a high of 7.71 in 2023. Generally, a higher inventory turnover indicates better inventory management and liquidity. Stepan's inventory turnover has shown some variability but has remained relatively stable, indicating the company's ability to convert inventory into sales.

2. Receivables Turnover:
- The receivables turnover ratio evaluates how effectively a company collects its accounts receivable. However, the data provided shows that the receivables turnover figures are denoted as "—,” which suggests that specific data is unavailable for analysis. This could be due to various reasons, including incomplete financial reporting or a negligible level of accounts receivable turnover.

3. Payables Turnover:
- Similar to the receivables turnover, the payables turnover ratio is crucial for assessing how efficiently a company manages its accounts payable. In this case, the data indicates that payables turnover figures are also denoted as "—," suggesting a lack of data available for analysis. This might be due to various factors, including the company's payment practices, the timing of accounts payable settlements, or the strategic management of trade credit by Stepan Company.

4. Working Capital Turnover:
- The working capital turnover ratio assesses how effectively a company utilizes its working capital to generate revenue. Stepan Company's working capital turnover has shown a consistent increasing trend from 3.82 in 2020 to 15.42 in 2024. A higher working capital turnover ratio indicates that the company is efficiently using its resources to drive sales and operations. Stepan's increasing trend in working capital turnover reflects a positive sign of improved operational efficiency and business performance over the years.

In summary, Stepan Company has demonstrated relatively stable inventory turnover, an inability to assess receivables and payables turnover due to missing data, and a significant improvement in working capital turnover, indicating enhanced operational efficiency and effective utilization of resources for revenue generation.

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Average number of days

Based on the provided data, Stepan Company's activity ratios can be analyzed as follows:

1. Days of Inventory on Hand (DOH):
- Stepan Company's DOH has shown fluctuations over the years, ranging from 47.32 days to 62.62 days.
- A higher number of days implies that the company holds its inventory for a longer period before selling, which could tie up working capital and potentially indicate inefficiencies in inventory management.
- The increase in DOH from 2020 to 2022 suggests a slower inventory turnover, which may lead to increased holding costs and risks associated with obsolete inventory.

2. Days of Sales Outstanding (DSO):
- The data provided indicates that specific values for DSO are not available, suggesting that details related to accounts receivable turnover are not provided.
- Lack of DSO information makes it challenging to assess the efficiency of Stepan Company in collecting payments from customers.

3. Number of Days of Payables:
- Similar to DSO, data for the number of days of payables is not available for Stepan Company for the years provided.
- Understanding the payment terms and the company's ability to manage its payables effectively is crucial for assessing its liquidity and relationships with suppliers.

Overall, the analysis of Stepan Company's activity ratios reveals fluctuations in inventory holding periods and highlights the importance of monitoring inventory turnover efficiency, accounts receivable management, and payables terms to optimize working capital management and operational performance.

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Long-term

The long-term activity ratios of Stepan Company, specifically the Fixed Asset Turnover and Total Asset Turnover, provide insights into the efficiency of the company's asset utilization over time.

1. Fixed Asset Turnover:
- Stepan Company's Fixed Asset Turnover has been relatively stable over the period from 2020 to 2022, with values of 2.74 in 2020, 2.76 in 2021, and 2.58 in 2022. However, for 2023 and 2024, the data is unavailable (denoted by "—").
- The Fixed Asset Turnover ratio measures how efficiently a company is generating revenue from its fixed assets. A higher ratio indicates better utilization of fixed assets to generate sales.
- Stepan's stable trend in Fixed Asset Turnover from 2020 to 2022 suggests a consistent level of efficiency in generating sales from fixed assets during these years.

2. Total Asset Turnover:
- Stepan Company's Total Asset Turnover has shown some variability over the period under review. The ratio was 1.07 in 2020, increased to 1.14 in 2021 and 2022, then decreased to 0.98 in 2023 and further to 0.95 in 2024.
- The Total Asset Turnover ratio indicates how efficiently a company is using all its assets to generate sales. A declining ratio over time may suggest that the company is becoming less efficient in generating revenue from its total assets.
- The fluctuation in Stepan's Total Asset Turnover from 2020 to 2024 indicates varying levels of efficiency in utilizing all assets to generate sales, with a notable decrease in 2023 and 2024.

In summary, the Fixed Asset Turnover ratio shows a more consistent trend over the years, whereas the Total Asset Turnover ratio displays some variability, with a notable decrease in the later years. Further analysis and comparison with industry benchmarks would be beneficial to understand the implications of these ratios on Stepan Company's overall operational efficiency and asset management strategies.