Seagate Technology PLC (STX)

Short-term

Turnover ratios

The analysis of Seagate Technology PLC’s activity ratios over the specified periods reveals several key trends and developments in its operational efficiency:

Inventory Turnover: The inventory turnover ratio demonstrates a decline over the observed years, decreasing from 6.45 times on June 30, 2021, to 5.23 in 2022, and slightly increasing to 5.29 in 2023. However, by June 30, 2024, it dropped more sharply to 4.05, indicating a reduction in the rate at which inventory is sold and replenished. The data for 2025 is unavailable, but the overall trend suggests a potential slowdown in inventory management efficiency or changes in inventory levels.

Receivables Turnover: The receivables turnover ratio shows variability, with a decrease from 9.22 in 2021 to 7.61 in 2022, then an increase to 11.89 in 2023, and further marginally to 12.15 in 2024. The increase from 2022 to 2024 indicates an improvement in collection efficiency, with the company collecting receivables more quickly relative to its average receivables balance during these years.

Payables Turnover: The payables turnover ratio declines across the periods, from 4.50 in 2021 to 3.98 in 2022, then to 3.76 in 2023, and further down to 2.81 in 2024. This downward trend suggests that the company is taking longer to pay its suppliers, potentially indicating a shift toward extended payment periods or changing negotiations with suppliers.

Working Capital Turnover: The working capital turnover ratio displays an increasing trend, rising from 12.45 in 2021 to 24.40 in 2022, and slightly decreasing to 23.59 in 2023. In 2024, it further increased to 28.12, reflecting a higher level of sales generated per unit of working capital employed. This indicates enhanced efficiency in utilizing working capital to generate revenue during these years.

Overall, the pattern of these activity ratios depicts a scenario where Seagate experienced efficiencies in receivables collection and working capital utilization, despite a decline in inventory turnover and payables turnover. The reduced inventory turnover may imply inventory management adjustments or shifts in sales dynamics, while the declining payables turnover suggests a strategic extension of payment terms. The increasing receivables and working capital turnover ratios point to improved operational effectiveness in those areas.

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Average number of days

The activity ratios for Seagate Technology PLC, specifically Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables, exhibit notable trends over the observed period.

Starting with the Days of Inventory on Hand, there is a gradual increase from 56.60 days as of June 30, 2021, to 69.73 days in 2022, and a slight decline to 68.97 days in 2023. However, a significant rise is observed in 2024, reaching 90.18 days, indicating that inventory is being held longer before sale. The absence of data for 2025 precludes further analysis, but the upward trend observed in 2024 suggests a shift towards increased inventory holding periods, potentially reflecting strategic inventory buildup or slower turnover.

For Days of Sales Outstanding, there is a decrease from 39.57 days in 2021 to 30.70 days in 2023, signifying an improvement in the receivables collection efficiency. The slight reduction from 47.95 days in 2022 to 30.70 days in 2023 indicates that the company has enhanced its receivables management, resulting in quicker cash inflows relative to sales. The data for 2024 is consistent at approximately 30 days, maintaining this efficiency. Data for 2025 is unavailable.

Regarding the Number of Days of Payables, an upward trend is evident, increasing from 81.10 days in 2021 to 91.70 days in 2022, then to 96.98 days in 2023, and substantially rising to 129.99 days in 2024. This progression indicates that the company has extended its payment periods to suppliers over time, which could enhance cash flow management, but may also impact supplier relationships or credit terms.

In summary, Seagate Technology PLC has demonstrated improvements in receivables collection times, reducing days outstanding, while inventory days have increased notably in 2024, signaling longer inventory holding periods. Simultaneously, the extension of payables suggests a strategy aimed at optimizing liquidity through delayed payments. These combined movements reflect a shifting operational dynamic that warrants further monitoring for implications on liquidity, operational efficiency, and supplier relations.

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Long-term

The analysis of Seagate Technology PLC’s long-term activity ratios over the given period reveals noteworthy trends in asset utilization efficiency.

The fixed asset turnover ratio, which measures how effectively a company utilizes its fixed assets to generate sales, demonstrates fluctuations over the three fiscal years. In the fiscal year ending June 30, 2021, this ratio was 4.90, indicating a relatively efficient deployment of fixed assets to produce revenue. It increased slightly to 5.21 in June 2022, reflecting an improvement in asset utilization. However, a decline is observed in the subsequent year, dropping to 4.33 in June 2023, suggesting a reduction in fixed asset efficiency or possibly increased asset base without a proportional increase in sales.

The total asset turnover ratio, representing overall asset utilization efficiency, follows a similar but more variable trend. It was 1.23 as of June 2021, increased to 1.30 in June 2022, which may point to enhanced overall efficiency. A significant decrease occurs in June 2023, with the ratio falling to 0.98, indicating that the company is generating less revenue per dollar of total assets compared to the previous year. This downward trend continues further in June 2024, with the ratio declining to 0.85, suggesting ongoing challenges in asset utilization efficiency or potential expansion of the asset base that has not yet translated into proportional sales growth.

Overall, the data indicates that Seagate’s asset utilization efficiency peaked around June 2022 but experienced a decline thereafter. This suggests a period of reduced operational efficiency in deploying assets to generate sales, which could be influenced by various factors such as changes in production capacity, asset aging, market conditions, or strategic shifts. The absence of data beyond June 2024 precludes further trend analysis, but the observed decline warrants consideration for operational improvements or strategic realignment to restore better asset utilization ratios.