Semtech Corporation (SMTC)

Short-term

Turnover ratios

1. Inventory turnover:
- Semtech's inventory turnover has been increasing steadily over the past five years, indicating that the company is managing its inventory more efficiently.
- The inventory turnover ratio has improved from 5.38 in 2020 to 11.76 in 2024, showing that Semtech is selling its inventory at a faster rate.

2. Receivables turnover:
- The receivables turnover ratio fluctuates but generally shows a decreasing trend over the past five years.
- The ratio was highest in 2022 at 10.29 and lowest in 2023 at 4.38. This could suggest that Semtech is taking longer to collect payments from its customers in recent years.

3. Payables turnover:
- Semtech's payables turnover ratio has been quite volatile over the past five years, but the trend shows an overall increase.
- The payables turnover has increased significantly from 8.18 in 2020 to 37.86 in 2024, indicating that the company is paying off its suppliers at a faster pace.

4. Working capital turnover:
- The working capital turnover ratio has shown an increasing trend over the past five years, demonstrating that Semtech is generating more revenue relative to its working capital investment.
- The ratio has improved from 1.49 in 2020 to 2.44 in 2024, indicating that Semtech is efficiently using its working capital to generate sales.

Overall, Semtech Corporation has shown improvements in its activity ratios, with better inventory turnover, higher payables turnover, and increased efficiency in working capital turnover. However, there are fluctuations in the receivables turnover ratio, suggesting a need for more efficient management of accounts receivable.

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Average number of days

The activity ratios of Semtech Corporation provide insight into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH): The trend in this ratio shows a notable improvement in inventory management efficiency over the past five years, with the number of days of inventory on hand decreasing from 126.12 days in 2023 to 31.02 days in 2024. A decrease in this ratio indicates that the company is selling its inventory faster, which could lead to lower carrying costs and improved cash flow.

2. Days of Sales Outstanding (DSO): The trend in this ratio indicates fluctuations in the collection period for accounts receivable. The DSO increased in 2024 compared to 2023, suggesting that the company took longer to collect payments from customers. However, it is lower than the DSO in 2022 and 2021. Efficient credit management and timely collection of receivables are crucial for maintaining healthy cash flows.

3. Number of Days of Payables: This ratio reveals the average number of days the company takes to pay its suppliers. The trend in this ratio suggests that Semtech Corporation has been extending its payment period over the past five years, with the number of days of payables increasing from 44.62 days in 2020 to 9.64 days in 2024. Extending payables can help improve liquidity and working capital management, but it is essential to maintain good relationships with suppliers.

Overall, analyzing these activity ratios together provides a holistic view of Semtech Corporation's operational efficiency and working capital management. It is important for the company to strike a balance between managing inventory levels, collecting receivables promptly, and paying suppliers in a timely manner to optimize cash flow and profitability.

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Long-term

The long-term activity ratios of Semtech Corporation reflect its efficiency in managing and utilizing its assets over the years. The fixed asset turnover ratio has shown a fluctuating trend, indicating that the company is generating more revenue from its fixed assets in recent years compared to the past. This implies that Semtech has been able to effectively utilize its investment in fixed assets to generate sales.

On the other hand, the total asset turnover ratio has also displayed variability, reaching its highest level in 2022. This ratio reveals the company's ability to generate sales from all its assets, including both fixed and current assets. The increasing trend in total asset turnover indicates that Semtech has been improving its overall asset utilization efficiency, translating its total assets into revenue more effectively in recent years.

Overall, the upward trends in both fixed asset turnover and total asset turnover ratios suggest that Semtech Corporation has been enhancing its operational efficiency and making better use of its assets to drive sales growth and improve financial performance.