Smart Global Holdings Inc (SGH)

Short-term

Turnover ratios

To begin with, let's analyze the inventory turnover ratio. This ratio indicates how efficiently SMART Global Holdings Inc is managing its inventory. The inventory turnover has been increasing steadily over the past five years, reaching 5.86 in 2023 from 3.28 in 2021. This suggests that the company is selling its inventory at a faster rate, which is generally a positive sign as it signifies efficient inventory management and reduced holding costs.

Next, let's look at the receivables turnover ratio. This ratio measures how quickly the company is collecting its accounts receivable. SMART Global Holdings Inc has demonstrated a consistent performance in this area, with the receivables turnover ratio increasing from 4.79 in 2021 to 6.57 in 2023. This indicates that the company is efficiently collecting its receivables, which is essential for maintaining healthy cash flows.

Moving on to the payables turnover ratio, which reflects how well the company is managing its accounts payable. The payables turnover has been on an upward trend, reaching 7.60 in 2023 from 2.78 in 2021. This indicates that SMART Global Holdings Inc is paying its suppliers at a faster rate, potentially taking advantage of early payment discounts and maintaining good relations with its creditors.

Lastly, let's consider the working capital turnover ratio. This ratio measures how efficiently the company is using its working capital to generate sales. The working capital turnover ratio has fluctuated over the past five years but has remained at a healthy level. In 2023, it stands at 3.00, suggesting that SMART Global Holdings Inc is utilizing its working capital effectively to support its operations and generate revenue.

In summary, the activity ratios of SMART Global Holdings Inc indicate a positive trend in the management of inventory, receivables, payables, and working capital. The increasing turnover ratios demonstrate the company's ability to efficiently convert inventory into sales, collect receivables, and manage payables, all of which contribute to overall operational efficiency and financial health.

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Average number of days

Based on the provided activity ratios for SMART Global Holdings Inc, we can analyze the efficiency of the company's inventory management, accounts receivable collection, and accounts payable turnover over the past five years.

Days of inventory on hand (DOH) measures the average number of days the company holds inventory before it is sold. The decreasing trend in DOH from 111.27 days in 2021 to 62.24 days in 2023 signals an improvement in inventory turnover efficiency. This suggests that the company is managing its inventory more effectively, potentially reducing holding costs and the risk of obsolete inventory.

Days of sales outstanding (DSO) reflects the average number of days it takes for the company to collect payment from its customers. The decreasing trend in DSO from 82.32 days in 2022 to 55.52 days in 2023 reveals an improvement in accounts receivable collection efficiency. This indicates that the company is collecting payments more promptly, which can improve cash flow and reduce the risk of bad debts.

Number of days of payables measures the average number of days it takes for the company to pay its suppliers. The fluctuating trend in the number of days of payables, with a decrease from 131.48 days in 2021 to 48.02 days in 2023, indicates varying efficiency in managing payables. A decreasing trend suggests that the company is paying its suppliers more promptly and potentially taking advantage of early payment discounts. On the other hand, an increasing trend could signal a potential strain on cash flow or deterioration in supplier relationships.

In summary, the decreasing trends in both DOH and DSO indicate improved efficiency in inventory management and accounts receivable collection for SMART Global Holdings Inc. However, the fluctuating trend in the number of days of payables suggests varying efficiency in managing payables, highlighting the importance of further examining the company's cash flow management and supplier relationships.

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Long-term

The long-term activity ratios provide insights into how efficiently SMART Global Holdings Inc is utilizing its assets to generate sales and how effectively it is managing its long-term capital investments. Here's a detailed analysis of the long-term activity ratios for SMART Global Holdings Inc based on the provided data:

Fixed Asset Turnover:
The fixed asset turnover ratio measures the efficiency of a company in generating sales from its long-term or fixed assets. A higher ratio indicates that the company is using its fixed assets more efficiently to generate sales revenue.

From the data:
- In 2023, the fixed asset turnover ratio was 12.14, which indicates a significant increase from the previous year. The company has been able to generate $12.14 in sales for every dollar invested in fixed assets.
- In 2022, the ratio was 11.82, showing a consistent high level of efficiency in utilizing fixed assets to generate sales.
- In 2021, the ratio was 9.61, indicating a decrease in the efficiency of using fixed assets to generate sales, possibly due to lower sales or a higher investment in fixed assets.
- In 2020, the ratio was 20.52, signaling a significant improvement in the efficient use of fixed assets to generate sales.
- In 2019, the ratio was 17.73, demonstrating a strong performance in utilizing fixed assets to generate sales.

Overall, the trend in fixed asset turnover shows fluctuations in utilizing fixed assets to generate sales, with some years exhibiting strong efficiency and others showing a relative decrease.

Total Asset Turnover:
The total asset turnover ratio indicates how effectively a company is utilizing its total assets to generate sales revenue. A higher ratio implies more efficient utilization of assets to drive sales.

From the data:
- In 2023, the total asset turnover ratio was 0.96, demonstrating a decline in the efficiency of using total assets to generate sales, as compared to the previous year.
- In 2022, the ratio was 1.16, indicating a higher efficiency in utilizing total assets to generate sales.
- In 2021, the ratio was 1.12, showing a relatively stable level of efficiency in using total assets in generating sales.
- In 2020, the ratio was 1.43, indicating a higher efficiency in utilizing total assets to generate sales.
- In 2019, the ratio was 1.72, demonstrating a strong performance in utilizing total assets to generate sales.

The trend in total asset turnover reveals fluctuations, with some years exhibiting strong efficiency in utilizing total assets to drive sales and others showing a moderate or relative decline.

In conclusion, analyzing the long-term activity ratios of SMART Global Holdings Inc over the years, it is evident that the company has shown varying levels of efficiency in utilizing its fixed and total assets to generate sales revenue. These ratios provide valuable insights into the company's long-term asset management and sales generation capabilities.