Trex Company Inc (TREX)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.08 | 7.65 | 5.97 | 11.01 | 9.49 |
| Receivables turnover | 13.00 | 21.51 | 8.94 | 7.90 | 7.70 |
| Payables turnover | 13.81 | 34.18 | 42.35 | 37.09 | 16.77 |
| Working capital turnover | — | 13.45 | — | 3.83 | 4.09 |
Trex Company Inc's activity ratios provide insights into how efficiently the company is managing its assets and liabilities.
1. Inventory Turnover:
- Trex Company Inc's inventory turnover ratio has shown some fluctuations over the years. It increased from 9.49 in 2020 to 11.01 in 2021, indicating that the company was able to sell its inventory more quickly in 2021. However, there was a decrease to 5.97 in 2022, suggesting a potential slowdown in sales. The ratio improved to 7.65 in 2023 but dropped to 4.08 in 2024, indicating a possible excess inventory issue that may impact profitability.
2. Receivables Turnover:
- The receivables turnover ratio reflects Trex Company Inc's effectiveness in collecting outstanding receivables. The ratio remained relatively stable from 2020 to 2022, ranging from 7.70 to 8.94. However, in 2023, there was a significant increase to 21.51, indicating a faster collection of receivables. The ratio decreased to 13.00 in 2024, which could imply a longer collection period or changes in credit policies.
3. Payables Turnover:
- Trex Company Inc's payables turnover ratio measures how quickly the company pays its suppliers. The ratio increased from 16.77 in 2020 to 42.35 in 2022, indicating a significant improvement in payment terms with suppliers. However, the ratio decreased to 13.81 in 2024, suggesting a longer payment cycle, which may impact cash flow and relationships with suppliers.
4. Working Capital Turnover:
- The working capital turnover ratio evaluates how efficiently Trex Company Inc utilizes its working capital to generate sales. The ratio was 4.09 in 2020, indicating that the company generated $4.09 in sales for every dollar of working capital. The ratio decreased to 3.83 in 2021 and was not available for 2022 and 2024. In 2023, the ratio significantly increased to 13.45, suggesting improved efficiency in utilizing working capital to drive sales.
In conclusion, analyzing Trex Company Inc's activity ratios reveals fluctuations in inventory management, receivables collection, payables payment, and working capital efficiency over the years. These ratios provide valuable insights into the company's operational performance and efficiency in managing its assets and liabilities.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 89.41 | 47.72 | 61.11 | 33.16 | 38.46 |
| Days of sales outstanding (DSO) | days | 28.07 | 16.97 | 40.84 | 46.20 | 47.42 |
| Number of days of payables | days | 26.43 | 10.68 | 8.62 | 9.84 | 21.77 |
The activity ratios of Trex Company Inc provide insights into the efficiency of its operations. Looking at the Days of Inventory on Hand (DOH) ratio, we observe a fluctuating trend over the years, indicating varying levels of inventory management efficiency. In 2020, with 38.46 days of inventory on hand, the company seemed to manage its inventory reasonably well. However, this ratio worsened in the following years, peaking at 89.41 days in 2024, suggesting potential issues with inventory control and turnover.
Moving on to the Days of Sales Outstanding (DSO) ratio, we see a more favorable trend. The company managed to lower its DSO from 47.42 days in 2020 to 28.07 days in 2024, indicating an improvement in the collection of receivables and possibly better credit policies. A lower DSO signifies that the company is collecting its accounts receivable more efficiently, which could positively impact its cash flow and liquidity.
Lastly, examining the Number of Days of Payables ratio, we note a slight increase in the number of days it takes for the company to pay its suppliers over the years. Starting at 21.77 days in 2020, this ratio peaked at 26.43 days in 2024, indicating a potential deterioration in the company's ability to manage its payables effectively.
Overall, while the DSO ratio improved and showcased better receivables management, the DOH and payables management ratios displayed less favorable trends, suggesting room for improvement in inventory control and payables management practices at Trex Company Inc.
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 1.24 | 1.54 | 1.85 | 2.60 | 2.62 |
| Total asset turnover | 0.87 | 1.17 | 1.17 | 1.30 | 1.14 |
Trex Company Inc's fixed asset turnover ratio has been gradually decreasing over the years, indicating a decline in the company's efficiency in generating sales from its fixed assets. The ratio dropped from 2.62 in 2020 to 1.24 in 2024, suggesting a significant decrease in asset utilization efficiency.
In contrast, the total asset turnover ratio fluctuated over the years, with a peak of 1.30 in 2021 and a low of 0.87 in 2024. This ratio measures the company's overall efficiency in generating sales from all assets, and the fluctuations suggest varying levels of asset utilization efficiency during the period.
Overall, the declining trend in the fixed asset turnover ratio and the fluctuating total asset turnover ratio indicate potential challenges in effectively leveraging the company's assets to generate revenue. Further analysis of the company's operational and strategic initiatives may be necessary to address these efficiency concerns.