SPS Commerce Inc (SPSC)

Short-term

Turnover ratios

The inventory turnover ratio for SPS Commerce Inc has shown a slight improvement over the years, increasing from 2.66 in 2020 to 2.96 in 2021 and then stabilizing around 2.90 in the following years. This indicates that the company is efficiently managing its inventory levels, with a higher turnover implying faster sales relative to the average amount of inventory held.

On the other hand, the receivables turnover ratio has been steadily increasing from 9.31 in 2020 to 12.26 in 2024. This suggests that the company is collecting its receivables more effectively, reflecting its ability to convert credit sales into cash.

In terms of payables turnover, there was a significant decrease in the ratio from 18.65 in 2020 to 13.60 in 2022. However, it then rebounded to 24.54 in 2023 and remained stable at 24.57 in 2024. This fluctuation could indicate changes in the company's payment terms with suppliers and its efficiency in managing its trade payables.

Lastly, the working capital turnover ratio has shown an increasing trend from 1.63 in 2020 to 2.71 in 2024. A higher working capital turnover ratio typically indicates a more efficient utilization of working capital to generate sales revenue.

Overall, these activity ratios suggest that SPS Commerce Inc has been effectively managing its inventory, receivables, payables, and working capital over the years, indicating strong operational efficiency and effective working capital management.

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Average number of days

Based on the provided data for SPS Commerce Inc, let's analyze the activity ratios:

1. Days of Inventory on Hand (DOH):
- SPS Commerce Inc's inventory turnover has shown a decreasing trend over the years, from 137.11 days in 2020 to 123.43 days in 2021 and further decreasing to 125.80 days in 2022. However, there is missing data for 2023 and 2024, making it hard to assess the current inventory management efficiency. A lower DOH indicates that the company is selling its inventory faster.

2. Days of Sales Outstanding (DSO):
- The Days of Sales Outstanding have decreased steadily over the years, from 39.20 days in 2020 to 29.78 days in 2024. This indicates that the company has been collecting its accounts receivable more efficiently, translating to quicker cash flows from sales.

3. Number of Days of Payables:
- SPS Commerce Inc's payables period was 19.57 days in 2020, but it has increased to 23.09 days in 2021 and further to 26.84 days in 2022. Interestingly, the payables period significantly decreased to 14.88 days in 2023 and stayed almost the same in 2024 at 14.86 days. A shorter payables period may signify better cash management but could also indicate potential difficulties in supplier relationships.

In summary, SPS Commerce Inc shows improvements in accounts receivable and payables management efficiency over the years, leading to faster cash conversion cycles. However, the inventory turnover trend is slightly unfavorable, and the missing data for 2023 and 2024 makes it challenging to draw a conclusive analysis. The company should continue monitoring and optimizing its working capital management to ensure a healthy balance between liquidity and operational effectiveness.

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Long-term

The analysis of SPS Commerce Inc's long-term activity ratios shows an increasing trend in both fixed asset turnover and total asset turnover over the years.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how efficiently a company generates sales revenue from its investment in fixed assets.
- SPS Commerce Inc's fixed asset turnover has been on a consistent upward trajectory, increasing from 11.83 in 2020 to 16.99 in 2024.
- This indicates that the company is effectively utilizing its fixed assets to generate higher sales, reflecting operational efficiency and productivity improvements.

2. Total Asset Turnover:
- The total asset turnover ratio reflects how efficiently a company utilizes its total assets to generate revenue.
- While there was a slight fluctuation, the total asset turnover ratio increased from 0.59 in 2020 to 0.62 in 2024.
- The increasing trend suggests that SPS Commerce Inc is managing its assets effectively to generate revenue, indicating improved operational efficiency and higher sales relative to its asset base.

Overall, the uptrend in both fixed asset turnover and total asset turnover ratios demonstrates SPS Commerce Inc's ability to optimize its asset utilization, drive sales growth, and improve operational efficiency over the long term.