Trex Company Inc (TREX)

Short-term

Turnover ratios

TREX Co., Inc.'s activity ratios provide valuable insights into the efficiency of the company's operations in managing its assets and liabilities.

1. Inventory turnover:
- TREX's inventory turnover has ranged from 4.97 to 8.79 over the last five years, indicating that the company is effectively managing its inventory levels. In 2023, the ratio reached its peak at 6.00, suggesting that TREX is selling through its inventory more quickly compared to previous years.

2. Receivables turnover:
- The receivables turnover ratio has shown significant fluctuations over the years, with values ranging from 7.69 to 21.57. The substantial increase to 21.57 in 2023 suggests that TREX has been collecting its receivables more efficiently, reflecting a strong sales collection process.

3. Payables turnover:
- TREX's payables turnover has also varied considerably, from 13.50 to 35.22. In 2023, the ratio decreased to 26.81, indicating that the company is taking longer to pay its suppliers. This could be a strategic move to improve cash flow or negotiate better payment terms with vendors.

4. Working capital turnover:
- The working capital turnover ratio measures how efficiently a company is using its working capital to generate sales. TREX's performance in this area has shown improvement over the years, with the ratio increasing from 3.32 in 2019 to 13.48 in 2023. This indicates that TREX has been able to generate more sales revenue for each dollar of working capital invested, reflecting enhanced operational efficiency.

Overall, TREX Co., Inc.'s activity ratios demonstrate a mixed performance in managing its assets and liabilities effectively. The company's inventory turnover and receivables turnover have shown positive trends, while fluctuations in payables turnover and notable improvement in working capital turnover highlight areas where TREX has been focusing on operational efficiency and cash flow management.

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Average number of days

TREX Co., Inc.'s activity ratios provide insights into the efficiency of its inventory management, accounts receivable collection, and accounts payable practices over the past five years.

1. Days of Inventory on Hand (DOH):
- The average number of days TREX Co., Inc. takes to sell its inventory decreased from 73.49 days in 2022 to 60.84 days in 2023. This indicates an improvement in managing inventory levels efficiently. However, it is worth noting that the DOH was higher in 2021 at 41.51 days, suggesting a less efficient inventory turnover compared to the latest year.

2. Days of Sales Outstanding (DSO):
- TREX Co., Inc.'s DSO, representing the average number of days it takes to collect accounts receivable, decreased significantly from 40.27 days in 2022 to 16.92 days in 2023. This improvement suggests a more prompt collection of receivables, reflecting better credit management and potential stronger customer relationships.

3. Number of Days of Payables:
- The trend in TREX Co., Inc.'s days of payables indicates fluctuations over the years, with the number of days of payables ranging from 10.36 days in 2022 to 27.04 days in 2020. In 2023, it decreased to 13.61 days. This variability may reflect changes in payment terms with suppliers or adjustments in working capital management strategies.

Overall, analyzing these activity ratios collectively can provide a comprehensive view of TREX Co., Inc.'s operational efficiency and effectiveness in managing its working capital components. The improvements in DSO and DOH suggest enhanced efficiency in accounts receivable and inventory management, while the variability in payables days may indicate evolving supplier relationships or cash flow management strategies.

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Long-term

Long-term activity ratios, such as fixed asset turnover and total asset turnover, provide insight into how efficiently a company is utilizing its assets to generate sales.

For TREX Co., Inc., there seems to be a declining trend in both fixed asset turnover and total asset turnover over the years. The fixed asset turnover has decreased from 4.35 in 2019 to 1.54 in 2023, indicating that the company is generating fewer sales relative to its fixed assets. This may suggest that the company is not effectively utilizing its long-term assets to drive revenue.

Similarly, the total asset turnover has also shown a downward trend, with a decrease from 1.26 in 2019 to 1.17 in 2023. This implies that the company is generating less revenue per dollar of total assets over the years, which could be a cause for concern.

Overall, the declining trend in both fixed asset turnover and total asset turnover for TREX Co., Inc. suggests that the company may need to reassess its asset management strategies and find ways to improve the efficiency of its asset utilization to boost sales and profitability in the long term.