Sterling Construction Company Inc (STRL)

Short-term

Turnover ratios

The activity ratios of Sterling Construction Company Inc, specifically focusing on inventory turnover, receivables turnover, payables turnover, and working capital turnover, demonstrate notable trends over the period from December 31, 2020, to December 31, 2024.

Inventory Turnover:
For the years where data is available, the company’s inventory turnover rate remains unreported or not calculated ("—") throughout the period. This indicates the absence of meaningful data or that inventory levels may be minimal or managed in a manner that precludes standard turnover calculations, which could suggest either significant changes in inventory management practices or that inventory is not a principal component of operations.

Receivables Turnover:
There is a clear upward trend in the receivables turnover ratio, increasing from 4.40 times in 2020 to 6.22 times in 2024. This suggests an improvement in the efficiency of collecting outstanding receivables, indicating that the company is progressing toward more effective credit management and faster cash conversion from receivables over this period.

Payables Turnover:
The payables turnover ratio exhibits a generally increasing trend, rising from 11.00 in 2020 to 12.96 in 2024. This reflects the company's ability to settle its payables more quickly, possibly indicating improved cash flow management or negotiated better payment terms with suppliers.

Working Capital Turnover:
There is a consistent decline in the working capital turnover ratio, decreasing from 30.93 in 2020 to 7.56 in 2024. This reduction may imply that the company is utilizing its working capital less intensively in generating sales over time. It could indicate a strategy of maintaining higher levels of working capital relative to sales, either due to operational considerations or a shift in sales volume dynamics.

Overall, the data demonstrates that Sterling Construction’s activity efficiency with respect to receivables and payables has improved, signifying enhanced liquidity management. However, the decline in working capital turnover suggests a possible change in operational scale, sales volume, or working capital strategy. The static or unreported inventory turnover warrants further inquiry for a comprehensive understanding of inventory management practices.

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Average number of days

The activity ratios of Sterling Construction Company Inc., specifically the days of inventory on hand, days of sales outstanding (DSO), and days of payables, provide insight into the company's operational efficiency and working capital management over the period from 2020 to 2024.

Days of Inventory on Hand (DOH): Data for this ratio are unavailable, as indicated by the "— days" entries for all periods. This absence suggests that either the company does not hold inventory in the traditional sense or that inventory management is not a significant component of its operations, which might be typical for certain types of construction or service-oriented firms.

Days of Sales Outstanding (DSO): The DSO exhibits a declining trend over the analyzed period. In 2020, the DSO stood at approximately 83.03 days, indicating that it took about three months for the company to collect receivables. This figure decreased to approximately 73.76 days in 2021, then slightly increased to 79.74 days in 2022 before consistently declining to 66.36 days in 2023 and further to 58.71 days in 2024. The downward trend reflects an improvement in receivables collection efficiency, suggesting enhanced cash flow management and potentially stronger credit policies or more prompt billing and collection procedures.

Number of Days of Payables: The period the company takes to pay its suppliers has remained relatively stable with minor fluctuations. It was approximately 33.19 days in 2020, increasing marginally to 33.99 days in 2021, then decreasing to 29.76 days in 2022. In 2023, it rose slightly to 32.59 days and further decreased to 28.17 days in 2024. The overall trend indicates a slight reduction in the Days of Payables, implying that the company is paying its suppliers more quickly over time, especially evident by the decline in 2022 and 2024.

Implications: The decreasing DSO implies improved efficiency in collections and cash flow management. The relatively low and slightly decreasing days of payables suggest a balanced approach to managing trade credit, possibly to maintain good supplier relationships or to improve liquidity. The lack of inventory data aligns with the nature of the company's operations, likely characterized by project-based work with minimal inventory holdings.

Overall, the activity ratios illustrate a company that has been enhancing its receivables collection process while maintaining or slightly reducing its payables period. This combination could signify improved liquidity positions and operational efficiencies within the analyzed timeframe.

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Long-term

The analysis of Sterling Construction Company Inc.'s long-term activity ratios reveals notable trends over the period from December 31, 2020, to December 31, 2023. The Fixed Asset Turnover ratio, which measures the efficiency with which the company utilizes its fixed assets to generate sales, experienced a decline from 8.57 in 2020 to 6.18 in 2021. Although there was a slight recovery to 6.44 in 2022, the ratio did not return to its 2020 levels, and data for 2023 and 2024 are unavailable.

Similarly, the Total Asset Turnover ratio, indicating overall asset utilization efficiency, decreased from 1.29 in 2020 to 1.15 in 2021 and then slightly increased to 1.23 in 2022. Nonetheless, the ratio continued a downward trend, reaching 1.11 in 2023 and further declining to 1.05 in 2024 when available.

Overall, these ratios suggest a pattern of decreasing asset efficiency over time. The decline in the Fixed Asset Turnover ratio indicates that the company’s fixed assets are being used less effectively to generate sales, which could be attributable to increased asset base without proportional revenue growth or operational inefficiencies. Similarly, the reduction in Total Asset Turnover implies diminished overall asset utilization efficiency, potentially reflecting changes in company operations, capital investment strategies, or market conditions affecting asset productivity. The absence of data beyond 2023 prevents further assessment of recent performance trends or potential recovery.