Valvoline Inc (VVV)

Short-term

Turnover ratios

Valvoline Inc's activity ratios provide insights into how efficiently the company is managing its inventory, receivables, payables, and working capital.

1. Inventory Turnover:
- Valvoline Inc has shown consistently high inventory turnover ratios over the past five years, ranging from 9.43 to 88.39.
- A higher inventory turnover ratio indicates that the company is effectively selling its inventory, which can help avoid excess inventory carrying costs and potential obsolescence.
- The significant increase in 2021 suggests improvements in inventory management and sales efficiency.

2. Receivables Turnover:
- The receivables turnover ratio has also been relatively high for Valvoline Inc, with values ranging from 5.48 to 45.10.
- A higher receivables turnover ratio indicates that the company is collecting outstanding receivables quickly, which can improve cash flow and reduce the risk of bad debt.
- The increasing trend in the receivables turnover ratio signifies enhanced efficiency in collecting revenue from customers.

3. Payables Turnover:
- Valvoline Inc has shown variability in its payables turnover ratio, fluctuating between 9.84 and 62.75 over the past five years.
- A higher payables turnover ratio suggests that the company is efficiently managing its payables by paying off its suppliers quickly.
- The significant decrease in the payables turnover ratio in 2022 followed by an increase in 2023 may indicate changes in the company's payment terms or vendor relationships.

4. Working Capital Turnover:
- The working capital turnover ratio for Valvoline Inc has shown an upward trend, indicating increased efficiency in utilizing working capital to generate sales.
- A higher working capital turnover ratio suggests that the company is effectively leveraging its assets to generate revenue.
- The absence of data for working capital turnover in 2024 makes it challenging to assess the most recent performance in this aspect.

Overall, Valvoline Inc's activity ratios reflect a strong emphasis on efficiency in managing inventory, receivables, payables, and working capital. The company's ability to maintain high turnover ratios indicates effective operational performance and strategic management of its resources.

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Average number of days

The activity ratios for Valvoline Inc over the past five years indicate the efficiency of the company in managing its inventory, receivables, and payables.

1. Days of inventory on hand (DOH):
- The DOH has been relatively stable over the years, ranging from 4.13 days in 2021 to 38.70 days in 2020.
- A lower DOH suggests effective inventory management and quicker turnover of goods, while a higher DOH may indicate excess inventory or slow sales.

2. Days of sales outstanding (DSO):
- The DSO has varied significantly, with the lowest at 8.09 days in 2021 and the highest at 66.55 days in 2020.
- A lower DSO implies faster collection of receivables, while a higher DSO may suggest delays in collecting payments from customers.

3. Number of days of payables:
- The number of days of payables has also fluctuated, from 5.82 days in 2021 to 37.08 days in 2023.
- A higher number of days of payables may indicate that the company is taking longer to settle its payables, which can be beneficial for cash flow management.

Overall, Valvoline Inc has shown varying efficiency in managing its inventory, receivables, and payables over the years. Analyzing these activity ratios can help in understanding the company's operational performance and potential areas for improvement in working capital management.

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Long-term

The fixed asset turnover ratio for Valvoline Inc has exhibited a declining trend over the past five years, indicating a decrease in the efficiency of generating sales from its fixed assets. This decline could suggest that the company may not be effectively utilizing its fixed assets to generate revenue.

Conversely, the total asset turnover ratio shows a fluctuating pattern over the same period. It reached its peak in 2021 but experienced a significant drop in 2022 before increasing slightly in 2023 and declining again in 2024. This variability suggests inconsistency in the company's overall ability to generate revenue from its total assets.

The fixed asset turnover ratio being consistently higher than the total asset turnover ratio indicates that Valvoline Inc is more efficient in generating sales from its fixed assets compared to its total assets. However, the decreasing trend in both ratios over time may raise concerns about the company's asset utilization efficiency and operational performance. Further investigation into the reasons behind these trends and potential strategies for improvement may be warranted to enhance the company's long-term financial performance.