Sensient Technologies Corporation (SXT)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 2.18 | 2.20 | 0.73 | 0.75 | 0.70 |
| Receivables turnover | 5.26 | 4.71 | 5.24 | 5.63 | 6.12 |
| Payables turnover | 9.97 | 8.73 | 2.40 | 2.67 | 3.13 |
| Working capital turnover | 2.04 | 2.15 | 2.69 | 2.51 | 2.22 |
Inventory turnover measures how efficiently a company manages its inventory. Sensient Technologies Corp.'s inventory turnover has shown a slight decrease from 2.38 in 2020 to 1.66 in 2023, indicating that the company is selling its inventory at a slower pace.
Receivables turnover ratio reflects how quickly a company collects its accounts receivable. Sensient's receivables turnover has fluctuated over the years but generally has been stable, with a notable increase in 2023 to 5.35 compared to 4.76 in 2022, indicating improvement in collecting receivables.
Payables turnover ratio demonstrates how efficiently a company pays its suppliers. Sensient's payables turnover has been declining over the years, with a significant drop from 9.59 in 2019 to 7.60 in 2023, indicating a slower payment to suppliers.
Working capital turnover measures how effectively a company utilizes its working capital in generating sales revenue. Sensient's working capital turnover has shown slight fluctuations over the years, with a decrease in 2023 to 2.08 from 2.71 in 2021, suggesting a decrease in sales relative to the working capital employed.
Overall, Sensient Technologies Corp. needs to focus on improving its inventory management efficiency, maintaining a stable receivables turnover, increasing payables turnover, and optimizing the utilization of its working capital to enhance operational performance and financial stability.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 167.13 | 165.74 | 499.70 | 485.76 | 519.84 |
| Days of sales outstanding (DSO) | days | 69.43 | 77.53 | 69.70 | 64.87 | 59.68 |
| Number of days of payables | days | 36.62 | 41.83 | 152.37 | 136.71 | 116.46 |
Sensient Technologies Corp.'s activity ratios provide insights into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.
1. Days of Inventory on Hand (DOH): This ratio indicates the number of days it takes for the company to turn its inventory into sales. Over the past five years, Sensient's DOH has been increasing, suggesting that the company is taking longer to sell its inventory. The rising trend may indicate excess inventory levels or challenges in inventory management efficiency.
2. Days of Sales Outstanding (DSO): DSO reflects how long it takes for the company to collect its accounts receivable. Sensient's DSO has fluctuated over the years but has generally been increasing. A higher DSO could imply potential issues with credit policies, collection processes, or customer payment delays.
3. Number of Days of Payables: This ratio measures how long it takes for the company to pay its suppliers. Sensient's days of payables have also been increasing, indicating that the company is taking longer to settle its payables. This trend may suggest improved payment terms negotiation with suppliers or liquidity constraints impacting the ability to settle obligations promptly.
Overall, analyzing Sensient Technologies Corp.'s activity ratios reveals potential areas for improvement in managing inventory levels, collecting receivables more efficiently, and optimizing payment practices with suppliers to enhance overall working capital management and operational effectiveness.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.83 | 2.94 | 3.06 | 2.96 | 2.98 |
| Total asset turnover | 0.71 | 0.72 | 0.78 | 0.76 | 0.75 |
The fixed asset turnover ratio for Sensient Technologies Corp. has been relatively stable over the past five years, ranging between 2.88 and 3.09. This indicates that the company generates between $2.88 and $3.09 in sales for each dollar invested in fixed assets. The consistent performance in this ratio suggests that Sensient is effectively utilizing its fixed assets to generate revenue.
On the other hand, the total asset turnover ratio for Sensient has also shown a degree of stability, albeit at lower levels compared to the fixed asset turnover. The total asset turnover ratio has fluctuated between 0.72 and 0.79 over the five-year period, indicating that the company generates between $0.72 and $0.79 in sales for each dollar of total assets. This suggests that Sensient may not be as efficient in utilizing its total assets to generate revenue compared to its fixed assets.
Overall, while both ratios provide insight into the efficiency of asset utilization, the fixed asset turnover ratio for Sensient Technologies Corp. indicates a better performance in making productive use of its fixed assets to drive sales, compared to its total asset turnover ratio. Management may consider strategies to further improve the efficiency of utilizing total assets to enhance overall operational performance and profitability.