SPS Commerce Inc (SPSC)

Short-term

Turnover ratios

Activity ratios provide insight into how efficiently a company is managing its resources to generate sales and collect cash.

1. Receivables turnover: SPS Commerce Inc. has shown consistent improvement in collecting its accounts receivable over the years, with a higher ratio indicating that the company is collecting its outstanding receivables more quickly. This trend suggests the company is managing its credit and collections processes effectively.

2. Payables turnover: The payables turnover ratio indicates how efficiently the company is managing its accounts payable. SPS Commerce Inc. has shown fluctuations in this ratio, with a high turnover ratio indicating that the company is paying its suppliers quickly. The increase in 2023 compared to the previous year may suggest improved cash management or negotiation power with suppliers.

3. Working capital turnover: This ratio measures how efficiently a company is utilizing its working capital to generate sales. The trend for SPS Commerce Inc. has been positive, indicating an improvement in utilizing its working capital to generate revenue over the years. A higher turnover ratio suggests that the company is effectively utilizing its working capital to drive sales and growth.

Overall, the activity ratios show that SPS Commerce Inc. has been effectively managing its working capital, accounts receivable, and accounts payable to drive revenue generation and maintain efficient cash flows.

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Average number of days

To analyze SPS Commerce Inc.'s activity ratios, we will look at the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables over the past five years.

1. Days of Inventory on Hand (DOH):
- Unfortunately, specific data for Days of Inventory on Hand is not available for any of the years provided. This ratio is important as it indicates how efficiently a company is managing its inventory levels. A lower DOH typically represents a more efficient inventory management process.

2. Days of Sales Outstanding (DSO):
- The Days of Sales Outstanding measure how long it takes for a company to collect its accounts receivable. From 2019 to 2023, there has been a gradual decrease in DSO from 41.23 days to 31.84 days. This improvement suggests that SPS Commerce Inc. has been able to collect its receivables more quickly over the years, which can improve its cash flow and working capital efficiency.

3. Number of Days of Payables:
- The Number of Days of Payables indicates how long a company takes to pay its suppliers. SPS Commerce Inc. has shown inconsistency in this ratio, with the number of days fluctuating over the years. In 2019, the company took 16.91 days to pay its payables, which increased to 26.84 days by 2022, and then decreased to 14.88 days in 2023. A lower number of days of payables can indicate better liquidity management, but it is important to also consider the payment terms negotiated with suppliers.

In summary, SPS Commerce Inc. has shown improvement in its Days of Sales Outstanding in terms of collecting receivables more efficiently over the years. However, the company's management of inventory levels and payables has not been evident from the data provided, as Days of Inventory on Hand and the Number of Days of Payables data is missing for analysis.

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Long-term

The fixed asset turnover ratio for SPS Commerce Inc. has shown a positive trend over the past five years, increasing from 11.75 in 2019 to 14.90 in 2023. This indicates that the company is generating more revenue for each dollar invested in fixed assets, reflecting efficient utilization of its fixed assets in revenue generation.

On the other hand, the total asset turnover ratio has fluctuated slightly over the same period, with a slight decrease from 0.62 in 2019 to 0.65 in 2023. This ratio measures how effectively the company is using its total assets to generate sales. Even though there has been some fluctuation, the overall trend suggests that the company is efficient in generating revenue relative to its total asset base.

In summary, SPS Commerce Inc. has demonstrated strong efficiency in utilizing its fixed assets to generate revenue, as evidenced by the increasing fixed asset turnover ratio. The fluctuations in the total asset turnover ratio indicate some variability in how effectively the company is using all its assets to generate sales, but the ratios overall suggest efficiency in asset utilization for revenue generation.