Trex Company Inc (TREX)
Liquidity ratios
| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 1.89 | 1.50 | 1.14 | 1.03 | 0.99 | 1.36 | 2.30 | 3.06 | 4.52 | 2.65 | 2.20 | 1.74 | 3.03 | 3.11 | 2.96 | 2.75 | 3.85 | 3.52 | 3.51 | 2.73 |
| Quick ratio | 0.58 | 1.13 | 0.89 | 0.72 | 0.46 | 0.53 | 1.41 | 2.22 | 3.30 | 2.05 | 1.61 | 1.35 | 2.22 | 2.48 | 2.34 | 2.11 | 2.92 | 2.87 | 2.80 | 2.13 |
| Cash ratio | 0.02 | 0.03 | 0.01 | 0.01 | 0.04 | 0.03 | 0.12 | 0.81 | 1.59 | 0.35 | 0.03 | 0.03 | 1.14 | 0.18 | 0.11 | 0.05 | 1.89 | 1.52 | 1.30 | 0.07 |
TREX Co., Inc.'s liquidity ratios reflect the company's ability to meet its short-term obligations.
The current ratio provides an indication of the company's ability to pay off its current liabilities with its current assets. Over the past eight quarters, TREX's current ratio has fluctuated, ranging from 0.99 to 3.06. The current ratio has generally been above 1, indicating that the company typically has more than enough current assets to cover its current liabilities. Notably, the current ratio saw a significant decline from Q1 2022 to Q1 2023, but has since improved.
The quick ratio, which excludes inventory from current assets, offers a more conservative measure of liquidity. TREX's quick ratio has varied widely, ranging from 0.50 to 2.37 over the same period. The trend in the quick ratio mirrors that of the current ratio, reflecting improvements in liquidity.
The cash ratio, which is the most stringent measure of liquidity as it considers only cash and cash equivalents, paints a more conservative picture. TREX's cash ratio has generally been low, ranging from 0.03 to 0.96. While the cash ratio indicates that TREX may have limited cash on hand to cover its current liabilities, it is important to note that the company may also have other liquid assets not included in this ratio.
Overall, TREX Co., Inc. has shown fluctuations in its liquidity ratios over the past eight quarters, with some periods indicating stronger liquidity positions than others. It is crucial for investors and stakeholders to monitor these ratios regularly to assess the company's ability to meet its short-term financial obligations.
Additional liquidity measure
| 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 |
The cash conversion cycle of TREX Co., Inc. has shown fluctuations over the past eight quarters, indicating variations in the efficiency of the company's cash management and operating cycle.
In Q1 2023, the cash conversion cycle reached its peak at 174.46 days, reflecting a significant delay in converting inventory into sales and eventually into cash. This prolonged cycle suggests potential inefficiencies in inventory management or a slow collection of accounts receivable.
Subsequently, in Q2 and Q3 2023, there was a noticeable improvement in the cash conversion cycle, with durations of 130.20 days and 83.41 days, respectively. These improvements may have been driven by better inventory turnover and quicker collection of receivables, indicating enhanced operational efficiency during these periods.
However, in Q4 2023, the cash conversion cycle increased to 64.15 days, which, although lower than the previous quarters, still represents a longer cycle compared to Q2 and Q3. This increase may signify challenges in managing working capital effectively or potential disruptions in the supply chain or sales cycle during the quarter.
Overall, TREX Co., Inc. should focus on maintaining or further reducing its cash conversion cycle to enhance liquidity, optimize working capital, and improve overall financial performance. Timely and efficient management of inventory, accounts receivable, and accounts payable will be crucial in achieving a more consistent and favorable cash conversion cycle in the future.