Trex Company Inc (TREX)
Cash conversion cycle
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 47.74 | 27.10 | 35.31 | 59.68 | 61.13 | 50.46 | 35.95 | 36.38 | 33.16 | 32.84 | 37.33 | 40.08 | 38.47 | 31.60 | 32.32 | 38.12 | 36.74 | 29.33 | 29.32 | 34.89 |
| Days of sales outstanding (DSO) | days | 16.95 | 68.33 | 107.40 | 116.98 | 40.84 | 26.95 | 47.84 | 57.03 | 46.20 | 86.44 | 97.33 | 121.96 | 47.43 | 113.04 | 116.59 | 114.96 | 39.69 | 59.55 | 64.44 | 115.61 |
| Number of days of payables | days | 10.68 | 14.27 | 15.38 | 10.80 | 8.62 | 8.36 | 20.61 | 22.87 | 9.84 | 20.26 | 20.72 | 20.93 | 21.77 | 20.43 | 18.31 | 18.77 | 9.97 | 16.46 | 18.65 | 16.37 |
| Cash conversion cycle | days | 54.00 | 81.16 | 127.34 | 165.85 | 93.34 | 69.06 | 63.18 | 70.54 | 69.52 | 99.02 | 113.94 | 141.11 | 64.12 | 124.22 | 130.59 | 134.31 | 66.46 | 72.42 | 75.10 | 134.13 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 47.74 + 16.95 – 10.68
= 54.00
The cash conversion cycle of TREX Co., Inc. has fluctuated over the past eight quarters, reflecting the company's efficiency in managing its working capital. In Q1 2023 and Q2 2023, the cash conversion cycles were relatively long at 174.46 days and 130.20 days, respectively, indicating that TREX took longer to convert its investments in inventory and accounts receivable into cash. This could be a concern as it ties up funds and may impact liquidity.
In Q3 2023, the cash conversion cycle decreased to 83.41 days, showing an improvement in the efficiency of TREX's working capital management. However, the cycle increased again to 64.15 days in Q4 2023, suggesting some challenges in this area.
Comparing year-over-year data, the cash conversion cycle was lower in Q4 2022 (103.40 days) compared to Q4 2023, indicating deterioration in working capital efficiency. Q1 2023 had the highest cash conversion cycle of the past eight quarters, which highlights a significant challenge in the company's cash flow management during that period.
Overall, TREX Co., Inc. should focus on optimizing its cash conversion cycle to ensure efficient operations and maintain adequate liquidity levels. Further analysis of the components of the cash conversion cycle, such as inventory turnover and accounts receivable days, may provide insights into specific areas for improvement.
Peer comparison
Dec 31, 2023