Stepan Company (SCL)

Liquidity ratios

Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019
Current ratio 1.40 1.46 1.46 1.52 1.56 1.78 1.70 1.77 1.82 1.71 1.76 1.72 2.17 2.31 2.50 2.48 2.41 2.72 2.69 2.74
Quick ratio 0.91 0.90 0.87 0.90 0.91 1.06 1.12 1.21 1.16 1.06 1.12 1.21 1.64 1.76 1.75 1.76 1.75 1.94 1.88 1.92
Cash ratio 0.21 0.18 0.21 0.19 0.26 0.27 0.30 0.39 0.32 0.21 0.27 0.39 0.91 0.94 0.85 0.82 0.93 0.98 0.92 0.91

Stepping Co.'s liquidity ratios have shown a declining trend over the past eight quarters. The current ratio, which measures the firm's ability to meet its short-term obligations with its current assets, decreased from 1.56 in Q4 2022 to 1.40 in Q4 2023. This indicates a decrease in the company's ability to cover its short-term liabilities with its current assets.

The quick ratio, a more stringent measure of liquidity that excludes inventory from current assets, also saw a downward trend from 1.27 in Q1 2022 to 0.96 in Q4 2023. This suggests a weakening ability of Stepan Co. to meet its immediate obligations with its most liquid assets.

Furthermore, the cash ratio, which signifies the proportion of a company's current liabilities that could be paid off with its cash and cash equivalents, has been declining steadily. The cash ratio decreased from 0.44 in Q1 2022 to 0.27 in Q4 2023, indicating a reduced capacity of the company to settle its short-term debts solely with its readily available cash resources.

Overall, Stepan Co.'s liquidity ratios reflect a deteriorating liquidity position over the past eight quarters, implying potential challenges in meeting short-term financial obligations solely from its current assets and cash reserves. This trend warrants further analysis and attention to ensure the company's financial health and stability.


Additional liquidity measure

Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019
Cash conversion cycle days 72.20 70.05 68.17 74.21 61.68 70.25 68.03 67.44 62.37 63.54 64.40 64.96 55.00 58.04 62.58 60.58 56.41 60.88 61.10 51.63

The cash conversion cycle measures the amount of time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. In the case of Stepan Co., the trend in the cash conversion cycle over the past eight quarters shows some fluctuations within a range of 61.67 to 74.70 days.

From Q1 2022 to Q2 2023, the cash conversion cycle of Stepan Co. has been gradually decreasing, indicating an improvement in the efficiency of its working capital management. This suggests that Stepan Co. has been able to shorten the time it takes to convert its investments in inventory and other operational expenses into cash generated from sales.

However, in Q4 2023, the cash conversion cycle slightly increased to 72.03 days compared to the previous quarter, which was at 70.20 days. This could indicate a potential slowdown in the company's ability to effectively manage its working capital, leading to a slight delay in the conversion of resources into cash.

Overall, a lower cash conversion cycle is generally seen as favorable as it indicates that a company is efficient in managing its working capital and generating cash flows from its operations. Stepan Co. should continue to monitor and potentially improve its cash conversion cycle to ensure optimal working capital efficiency and liquidity management.