Stepan Company (SCL)

Short-term

Turnover ratios

Stepping into the activity ratios analysis of Stepan Company, let's dive into the numbers.

1. Inventory Turnover: Stepan Company's inventory turnover ratio has fluctuated over time, ranging from 5.82 to 7.71, indicating the number of times inventory is sold and replaced during a specific period. Despite some variability, the company generally manages its inventory efficiently, with turnover staying within a relatively healthy range.

2. Receivables Turnover: Unfortunately, data on Stepan's receivables turnover ratio is not provided, making it challenging to assess how quickly the company collects outstanding receivables from customers. The absence of this data limits our ability to evaluate the efficiency of the company's credit and collection policies.

3. Payables Turnover: Similar to receivables turnover, information on Stepan's payables turnover ratio is missing. This ratio would typically provide insights into how quickly the company pays its suppliers, affecting its liquidity and relationships with vendors.

4. Working Capital Turnover: Stepan's working capital turnover ratio has exhibited a positive trend, increasing from 3.79 to 15.42 over the period under review. This improvement suggests that the company is generating more revenue relative to its working capital, indicating enhanced operational efficiency and potentially stronger financial performance.

In conclusion, while the inventory turnover and working capital turnover ratios provide some insights into Stepan Company's operational efficiency and ability to utilize resources effectively, the lack of data on receivables and payables turnover ratios hinders a comprehensive assessment of the company's overall activity performance.

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Average number of days

Based on the provided data for Stepan Company's activity ratios:

1. Days of Inventory on Hand (DOH):
- Stepan Company's DOH fluctuated over the period from March 31, 2020, to December 31, 2024, ranging from a low of 47.32 days to a high of 62.73 days.
- Generally, a lower DOH indicates better inventory management and liquidity, whereas a higher DOH may imply inefficiencies in managing inventory levels.
- Stepan Company experienced a gradual increase in DOH from March 31, 2020, to September 30, 2022, with a peak at 62.73 days. However, the DOH decreased slightly by December 31, 2022, and continued to fluctuate between 47.32 days and 56.85 days by December 31, 2024.

2. Days of Sales Outstanding (DSO):
- The data does not provide information on Stepan Company's DSO, suggesting that DSO calculations may not be applicable or available for this company.
- DSO is a measure of how long it takes for a company to collect revenue after a sale. Typically, a lower DSO is favorable as it indicates faster cash collection from customers.

3. Number of Days of Payables:
- The data also lacks information on Stepan Company's Number of Days of Payables, indicating that payables turnover calculations may not be applicable or available.
- The number of days of payables reflects how long a company takes to pay its suppliers. A longer period may indicate favorable supplier terms or potential liquidity benefits.

In summary, with the interpretation of the company's inventory management through the DOH ratio, it is evident that Stepan Company experienced fluctuations in its inventory holding period over the analyzed period, potentially impacting its operational efficiency and working capital management. Further insights could be obtained by assessing DSO and payables turnover ratios if the data were available.

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Long-term

The Fixed Asset Turnover ratio for Stepan Company has been fluctuating over the years. It started at 2.90 in March 2020, declined gradually, reached its lowest point of 1.94 in September 2023, and then remained stable. The ratio indicates that the company generates $2.78 in sales for every dollar invested in fixed assets as of March 2024.

Similarly, the Total Asset Turnover ratio shows a decreasing trend over the years. It stood at 1.21 in March 2020, decreased to 0.94 by June 2024. This decline suggests that the company's efficiency in generating sales from its total assets has decreased over time.

Analyzing both ratios together, it can be inferred that Stepan Company's efficiency in utilizing its fixed assets and total assets to generate sales has declined over the years, which may indicate a need for improved asset management strategies to enhance profitability.