Waters Corporation (WAT)

Short-term

Turnover ratios

Activity ratios provide insight into how efficiently a company is managing its resources related to inventory, receivables, payables, and working capital. Let's analyze the activity ratios of Waters Corporation based on the provided data:

1. Inventory Turnover:
- The inventory turnover ratio indicates how many times a company sells and replaces its inventory during a period.
- Waters Corporation's inventory turnover has shown a slight decrease over the years, from 5.34 in 2020 to 4.02 in 2023, before picking up to 5.53 in 2024.
- A higher inventory turnover ratio generally indicates better inventory management and liquidity.

2. Receivables Turnover:
- The receivables turnover ratio measures how efficiently a company collects on its credit sales.
- Waters Corporation's receivables turnover has been relatively stable, ranging from 3.99 to 4.47 over the years.
- Consistent receivables turnover suggests effective credit and collection policies.

3. Payables Turnover:
- The payables turnover ratio reflects the speed at which a company pays its suppliers.
- Waters Corporation's payables turnover has shown an increasing trend, from 19.04 in 2021 to 26.41 in 2024.
- A higher payables turnover ratio may indicate the company is managing its payables well or taking advantage of favorable credit terms.

4. Working Capital Turnover:
- The working capital turnover ratio measures how efficiently a company generates sales revenue relative to its working capital.
- Waters Corporation's working capital turnover has fluctuated somewhat over the years, ranging from 2.88 to 3.32.
- A higher working capital turnover ratio indicates better utilization of working capital to generate sales.

Overall, these activity ratios provide insight into Waters Corporation's management of inventory, receivables, payables, and working capital. It is essential to assess these ratios in conjunction with other financial metrics to gain a comprehensive understanding of the company's operational efficiency and financial health.

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Average number of days

The activity ratios for Waters Corporation provide insights into the efficiency of its operations in managing inventory, collecting receivables, and paying its suppliers.

1. Days of Inventory on Hand (DOH):
- The number of days of inventory on hand has shown some fluctuation over the years, ranging from 66.01 days to 90.82 days.
- A higher number of days of inventory on hand indicates that Waters Corporation may be holding onto excess inventory, which could tie up capital and increase holding costs.
- The increase in DOH from 2020 to 2024 suggests a need for closer monitoring of inventory levels and potential adjustments to inventory management practices.

2. Days of Sales Outstanding (DSO):
- Days of sales outstanding have remained relatively stable over the years, with values ranging from 81.73 days to 91.58 days.
- A higher DSO indicates that Waters Corporation takes longer to collect payment from customers, which could impact cash flow and liquidity.
- The consistent DSO levels suggest the company's credit and collection policies are effectively managing receivables, although efforts to reduce DSO further could improve cash flow efficiency.

3. Number of Days of Payables:
- The number of days of payables has decreased from 16.23 days in 2020 to 13.82 days in 2024.
- A decrease in the number of days of payables indicates that Waters Corporation is paying its suppliers more quickly, which could be a positive indicator of strong supplier relationships or favorable payment terms.
- While managing payables efficiently can improve relationships with suppliers, careful balance is required to optimize working capital management without impacting supplier relationships negatively.

Overall, monitoring and analyzing these activity ratios can help Waters Corporation identify areas for improvement in its working capital management and operational efficiency.

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Long-term

Waters Corporation's long-term activity ratios demonstrate the efficiency with which the company is utilizing its assets.

1. Fixed Asset Turnover: This ratio indicates how effectively the company is generating revenue from its investments in fixed assets. Waters Corporation's fixed asset turnover has been relatively stable over the years, ranging from 4.45 to 4.99. A higher ratio suggests that the company is efficiently utilizing its fixed assets to generate sales. The slight fluctuations in the ratio indicate that the company has maintained a consistent level of productivity in utilizing its fixed assets.

2. Total Asset Turnover: This ratio measures the company's ability to generate sales from all assets on its balance sheet. Waters Corporation's total asset turnover has shown a varied trend, ranging from 0.61 to 0.88. A higher ratio signifies that the company is efficient in generating sales from its total assets. The fluctuation in this ratio may indicate changes in the company's sales volume and asset utilization efficiency over the years.

Overall, the long-term activity ratios of Waters Corporation suggest that the company has been effectively utilizing its assets to generate revenue. By closely monitoring these ratios, stakeholders can assess the efficiency and effectiveness of the company's asset management strategies and operational performance.