Sterling Construction Company Inc (STRL)

Short-term

Turnover ratios

The analysis of Sterling Construction Company Inc.'s activity ratios over the specified period provides insights into its operational efficiency and working capital management.

Inventory Turnover:
The data for inventory turnover records as undefined ("—") across all periods, indicating that the company either does not hold significant inventories typical of its business model or that inventory data was not available or relevant during this timeframe. This could suggest a service-oriented or project-based operation where inventory management is minimal.

Receivables Turnover:
The receivables turnover ratio exhibits variability over the period, with initial figures around 4.00–5.19 in 2020 and 2021, then declining to as low as approximately 3.76 toward the end of 2022. Subsequently, there is a notable upward trend, reaching a peak of 7.37 in March 2025. This suggests an improvement in collection efficiency over time, especially in recent periods, indicating that the company may have enhanced its credit management or collection processes, leading to faster cash inflows from receivables.

Payables Turnover:
The payables turnover ratio shows fluctuations but generally maintains a high level, ranging from approximately 8.98 to 13.72. Notably, the ratio increased during 2020 to over 12.98 and again in late 2022 and early 2023, reaching as high as 13.72. Elevated ratios imply that the company is paying its suppliers more frequently or promptly, which might reflect improved liquidity or a strategic approach to vendor relationships. Periods of lower ratios could indicate extended payment terms or cash conservation measures.

Working Capital Turnover:
The working capital turnover ratio demonstrates significant variation, with initial values near 16.95 in June 2020, then peaking at 43.84 in March 2021. After this peak, it declines sharply and fluctuates in the range of approximately 7.56 to 20.43 through 2024. The high ratios in early 2021 suggest that the company was efficiently utilizing its working capital to generate sales or activity during that period. The subsequent decline indicates a reduction in activity efficiency or increased working capital, potentially tied to operational adjustments or changes in project pipeline. The overall trend shows increased utilization of working capital in late 2020 and early 2021, followed by stabilizing at lower levels.

Summary:
The activity ratios indicate a company that experienced periods of high operational efficiency, especially in early 2021, with strong working capital utilization. Over time, improvements in receivables collection efficiency are evident, particularly late in the period. The high payables turnover ratios reflect prompt payments or reduced credit terms with suppliers, contributing to effective working capital management. The absence of inventory data suggests that inventory management is not a core component of the company’s operations, aligning with its construction or project-based business profile. Overall, these ratios portray a company that has been actively managing its receivables and payables to sustain operational liquidity and efficiency.

---

Average number of days

The activity ratios of Sterling Construction Company Inc., specifically focusing on inventory turnover, receivables collection, and payable periods, exhibit notable trends over the analyzed periods.

Days of Inventory on Hand (DOH):
The data indicates that there are no recorded values for Days of Inventory on Hand throughout the entire period from June 2020 through March 2025. This absence suggests that inventory levels are either maintained at minimal or negligible levels, potentially due to the nature of the company's operations, which could involve project-based or service-oriented activities with little to no emphasis on inventory accumulation.

Days of Sales Outstanding (DSO):
The DSO presents a fluctuating but generally declining trend over time, reflecting changes in the company's receivables collection efficiency. Starting at 91.28 days in June 2020, the DSO decreased to 71.36 days by December 2020, indicating improved collection effectiveness early in the period. A brief increase was observed with an uptick to 97.03 days in September 2022, followed by a downward trend to reach 49.52 days by March 2025. The notable decline in DSO in the later years suggests that Sterling Construction has enhanced its receivables management, improving cash flow and reducing the time it takes to convert receivables into cash.

Number of Days of Payables:
Payable days show variability but remain within a moderate range throughout the period. Starting at 40.64 days in June 2020, the period experienced fluctuations, reaching a low of 26.95 days in December 2022, indicating faster payments to suppliers during that period. There is an upward trend afterward, with payable days rising to over 35 days before stabilizing around the early 30s in late 2023 and into 2024. The general movement suggests that the company manages its payables with a moderate approach, balancing payment schedules to optimize cash management without significantly straining supplier relationships.

Overall Summary:
Sterling Construction Company Inc. displays a consistent pattern of effective receivables management, as evidenced by the decreasing DSO trend, especially toward the latter part of the period. The absence of inventory on hand points to operational characteristics that do not rely heavily on inventory holdings. The manageable fluctuation in payable days indicates a balanced approach to vendor payments, likely aligned with maintaining good supplier relationships while optimizing cash flow. These activity ratios collectively reflect an adaptive and potentially efficient operational cycle, with particular strength in receivables management contributing to improved liquidity status over time.

---

Long-term

The analysis of Sterling Construction Company Inc.'s long-term activity ratios reveals notable trends over the observed periods.

Fixed Asset Turnover Ratio Analysis:
The fixed asset turnover ratio demonstrates a decreasing trend from its peak of 11.74 in September 2020 to 6.64 by September 2022, after experiencing an initial decline from 11.16 in June 2020. This decline indicates that the company's efficiency in utilizing its fixed assets (property, plant, equipment) to generate revenue has diminished over the period. The ratios suggest that the company is generating less sales per dollar invested in fixed assets, which could be attributable to factors such as asset write-downs, shifts in operational scope, or reduced asset utilization efficiency. Post-September 2022, data gaps preclude further analysis into recent fixed asset efficiency.

Total Asset Turnover Ratio Analysis:
The total asset turnover ratio also reflects a declining trend, decreasing from a high of 1.50 on December 31, 2020, to approximately 1.04 as of September 2024. The initial period shows the company's ability to generate sales from its total assets improving slightly before declines are observed. In the recent periods, the ratio stabilizes somewhat but remains below earlier levels, indicating a persistent reduction in overall asset efficiency. This pattern suggests that the company is producing less revenue per dollar of total assets over time, which may be linked to increased asset base, operational challenges, or shifts in business strategy.

Overall Implications:
Both the fixed asset turnover and total asset turnover ratios exhibit downward trends, signaling a decline in asset utilization efficiency over the recent periods. This could imply that Sterling Construction Company Inc. is experiencing challenges in leveraging its assets to generate sales effectively, potentially due to operational inefficiencies, asset underperformance, or strategic shifts reducing asset productivity. The consistent decrease in these ratios warrants further investigation into underlying causes, including asset management policies, capital investment patterns, and market conditions impacting operational efficiency.