Treehouse Foods Inc (THS)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 5.35 | 5.01 | 5.37 | 4.09 | 6.42 |
| Receivables turnover | 19.54 | 21.75 | 19.47 | 9.70 | 15.85 |
| Payables turnover | 5.34 | 4.48 | 3.96 | 3.90 | 6.87 |
| Working capital turnover | 9.79 | 297.76 | 2.87 | 6.83 | 10.56 |
The activity ratios of Treehouse Foods Inc for the years 2019 to 2023 provide insight into the company's efficiency in managing its inventory, receivables, payables, and working capital.
1. Inventory Turnover:
Treehouse Foods Inc has maintained a relatively stable inventory turnover ratio over the past five years, ranging from 4.99 to 6.42 times. The ratio indicates how efficiently the company is managing its inventory levels and converting inventory into sales. A higher inventory turnover ratio suggests that the company is selling its products quickly and efficiently. The slight decrease in inventory turnover from 2020 to 2022 may indicate changes in the company's inventory management strategies.
2. Receivables Turnover:
The company's receivables turnover ratio has fluctuated over the years, ranging from 14.09 to 21.75 times. A higher receivables turnover ratio indicates that Treehouse Foods Inc is collecting its accounts receivable more frequently. The significant increase in receivables turnover from 2020 to 2022 suggests an improvement in the company's credit policies or collection procedures, leading to quicker cash inflows from customers.
3. Payables Turnover:
Treehouse Foods Inc's payables turnover has also shown fluctuations, ranging from 4.62 to 6.87 times. The payables turnover ratio measures how quickly the company is paying its suppliers. A higher payables turnover ratio indicates that the company is managing its trade payables efficiently. The decrease in payables turnover from 2021 to 2023 may indicate changes in the company's payment terms with suppliers.
4. Working Capital Turnover:
The working capital turnover ratio reflects how efficiently Treehouse Foods Inc is utilizing its working capital to generate sales. The company has shown varying working capital turnover ratios, with a significant increase in 2022. The spike in the ratio in 2022 suggests that Treehouse Foods Inc was able to generate sales using a relatively lower amount of working capital, indicating improved efficiency in working capital management.
Overall, analyzing Treehouse Foods Inc's activity ratios provides valuable insights into the company's operational efficiency and effectiveness in managing its resources to drive sales and profitability.
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 | 68.26 | 72.88 | 67.96 | 89.19 | 56.86 |
| Days of sales outstanding (DSO) | days | 18.68 | 16.78 | 18.75 | 37.64 | 23.03 |
| Number of days of payables | days | 68.37 | 81.39 | 92.15 | 93.53 | 53.14 |
Treehouse Foods Inc's activity ratios reveal important insights into the company's efficiency in managing its inventory, collecting receivables, and paying suppliers.
1. Days of Inventory on Hand (DOH): The DOH measures how many days, on average, it takes for the company to sell its inventory. A decreasing trend in this ratio over the years (from 56.86 days in 2019 to 68.26 days in 2023) suggests that the company has been holding inventory for longer periods, which may indicate inefficiencies in inventory management.
2. Days of Sales Outstanding (DSO): The DSO ratio indicates how efficiently the company collects its accounts receivables. A declining trend in this ratio (from 23.03 days in 2019 to 18.68 days in 2023) reflects an improvement in the company's ability to collect payments from customers promptly, enhancing its cash flow position.
3. Number of Days of Payables: This ratio shows the number of days it takes for the company to pay its suppliers. A rising trend in the number of days of payables (from 53.14 days in 2019 to 68.37 days in 2023) may imply that the company is taking longer to settle its payables, potentially signaling liquidity concerns or strained supplier relationships.
Overall, while Treehouse Foods Inc has shown improvement in collecting receivables efficiently, the increasing days of inventory on hand and days of payables may warrant further investigation into the company's inventory management and supplier payment practices to optimize working capital efficiency.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 4.66 | 5.39 | 4.22 | 2.81 | 4.10 |
| Total asset turnover | 0.84 | 0.81 | 0.57 | 0.55 | 0.83 |
Long-term activity ratios provide insights into how efficiently a company is utilizing its assets to generate sales.
Treehouse Foods Inc's fixed asset turnover has fluctuated over the last five years, with a peak in 2022 at 5.18 and a low in 2020 at 4.07. This ratio measures the company's ability to generate revenue from its investment in fixed assets. A higher fixed asset turnover ratio indicates that the company is generating more sales per dollar of fixed assets, reflecting efficient asset utilization.
In contrast, the total asset turnover ratio has shown a relatively stable trend, ranging between 0.79 and 0.84 over the same period. This ratio evaluates the company's ability to generate revenue from all assets, including both fixed and current assets. A higher total asset turnover ratio suggests that the company is effectively utilizing all its assets to generate sales.
Overall, Treehouse Foods Inc's long-term activity ratios indicate that the company has been efficient in converting its investments in fixed and total assets into sales over the years, with fluctuations in the fixed asset turnover ratio and relatively stable total asset turnover ratio. It is important for the company to monitor and potentially improve these ratios to enhance operational efficiency and profitability.