Valvoline Inc (VVV)

Short-term

Turnover ratios

The activity ratios of Valvoline Inc show varying trends over the past five years. The inventory turnover has steadily increased from 7.49 in 2020 to 27.00 in 2023, indicating that the company is selling its inventory more efficiently. The receivables turnover has also shown an increasing trend, from 5.43 in 2019 to 17.76 in 2023, suggesting that the company is collecting its receivables at a faster rate.

Notably, payables turnover data is not available, so the analysis of this specific ratio is not possible. However, the working capital turnover has shown fluctuations over the years, with a peak of 6.39 in 2019, followed by a decline in 2020, and a subsequent increase to 2.51 in 2023. This indicates that the company's efficiency in utilizing its working capital has varied over the years.

Overall, the increasing trends in inventory and receivables turnover ratios reflect improved efficiency in managing inventory and collecting receivables, while the fluctuating working capital turnover suggests varying effectiveness in using the company's working capital to generate sales.

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Average number of days

To analyze the activity ratios of Valvoline Inc, we will focus on the days of inventory on hand (DOH) and the days of sales outstanding (DSO) for the past five years.

Days of inventory on hand (DOH) measures the number of days it takes for a company to sell its inventory. A lower DOH indicates that the company is selling its inventory more quickly, which is generally favorable.

In 2023, Valvoline Inc's DOH decreased to 13.52 days from 14.13 days in 2022, indicating an improvement in inventory management. This trend suggests that the company has been more efficient in selling its products and managing its inventory levels.

Days of sales outstanding (DSO) measures the average number of days it takes for a company to collect its accounts receivable. A lower DSO indicates that the company is collecting its receivables more quickly, which is favorable.

In 2023, Valvoline Inc's DSO increased to 20.56 days from 19.52 days in 2022. Although an increase in DSO could indicate a slower collections process, the increase in this case is relatively small and may not raise significant concerns.

The absence of data on the number of days of payables limits a comprehensive analysis of Valvoline Inc's working capital management.

In summary, the decrease in days of inventory on hand and the slight increase in days of sales outstanding for Valvoline Inc suggest improvements in inventory management and relatively stable collections processes. However, a more comprehensive analysis including the number of days of payables would provide further insights into the company's working capital management.

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Long-term

The fixed asset turnover ratio measures how effectively Valvoline Inc utilizes its fixed assets to generate sales, while the total asset turnover ratio assesses the company's ability to generate sales relative to its total assets.

For Valvoline Inc, the fixed asset turnover ratio has decreased from 1.85 in 2022 to 1.76 in 2023. This suggests a slight decline in the company's efficiency in generating sales from its fixed assets over the past year. However, it is important to note that the ratio remains relatively stable compared to the significant drop from 2019 to 2021.

Meanwhile, the total asset turnover ratio has increased from 0.36 in 2022 to 0.50 in 2023, indicating an improvement in the company's overall ability to generate sales in relation to its total assets during the same period. This is a positive trend compared to the decline observed from 2019 to 2021.

In summary, while Valvoline Inc's fixed asset turnover has seen a modest decrease, its total asset turnover has shown improvement. These ratios suggest that the company may be effectively managing its total assets to generate sales, albeit with some fluctuations in the utilization of fixed assets.