Worthington Industries Inc (WOR)

Short-term

Turnover ratios

The analysis of Worthington Industries Inc.'s activity ratios over the observed periods reveals significant fluctuations and evolving trends indicative of operational changes and inventory management practices.

Inventory Turnover:
The inventory turnover ratio demonstrates considerable volatility. Historically, the ratio ranged from a high of 7.74 in November 2020 to a low of 3.82 in August 2021, reflecting variations in inventory levels relative to sales. A notable spike occurred in February 2024 at 16.63, suggesting a period of rapid inventory liquidation or improved inventory management efficiency, whereas subsequent months recorded a decline to 4.91 in November 2024. This pattern indicates periods of either excess inventory accumulation or tighter inventory controls, with recent figures suggesting stabilization around mid-range levels.

Receivables Turnover:
Receivables turnover provides insight into credit collection efficiency. The ratio showed a downward trend from 6.83 in August 2020 to around 4.94 in May 2021, then gradually increased, reaching a peak of 18.52 in May 2023. This sharp increase signals a substantial improvement in collection efficiency during that period, followed by a decline to approximately 5.63 in August 2023. The ratio's fluctuation indicates dynamic credit policies and collection efforts, with notable peaks possibly associated with specific strategies or market conditions. The exceptionally high ratio observed in May 2023 may warrant further investigation to confirm its accuracy, given its deviation from previous trends.

Payables Turnover:
This ratio exhibits considerable variability, with a general pattern of increases and decreases. The turnover rose markedly from 8.39 in August 2020 to a peak of 28.10 in May 2023, implying shorter payables periods and potentially improved supplier payment terms or strategic payment timing. Conversely, the ratio dipped to 6.30 in August 2023 before rising again later, indicating fluctuating management of accounts payable and payment cycles. The recent high peaks suggest aggressive payment practices or negotiations for more favorable terms.

Working Capital Turnover:
The working capital turnover ratio shows an overall upward trend initially, rising from 2.37 in August 2020 to a peak of 6.14 in May 2022, reflecting increased efficiency in utilizing working capital to generate sales. Subsequently, the ratio declined sharply to 2.36 in May 2025, indicating either a reduction in sales relative to working capital or alterations in operational efficiency. The recent figures demonstrate a period of decline from previous highs, which may point toward shifting operational strategies or market conditions influencing working capital utilization.

Summary:
The activity ratios collectively depict a company experiencing periods of operational efficiency improvements, notably in inventory and receivables management, punctuated by phases of volatility. Peaks in receivables turnover in May 2023 and payables turnover in May 2023 suggest strategic shifts towards faster receivables collection and shorter payables periods, potentially aiming to optimize cash flow. Conversely, fluctuations in inventory turnover and working capital efficiency highlight ongoing challenges in inventory management and resource utilization. Overall, the patterns indicate a dynamic operational environment with strategic adjustments over time.

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Average number of days

The activity ratios of Worthington Industries Inc., as reflected in the provided data, reveal notable trends and fluctuations across the analyzed periods, which can be interpreted to understand the company's operational efficiency.

Days of Inventory on Hand (DOH):
The DOH ratio indicates the average number of days inventory is held before being sold. During the period from August 2020 to November 2021, there was a consistent upward trend, with the days increasing from approximately 47.27 days to a peak of 95.61 days. This suggests a gradual buildup in inventory levels, possibly due to strategic inventory accumulation or supply chain adjustments. Starting from November 2021, the DOH generally declined, reaching a low of approximately 21.94 days in February 2024. Post this period, the ratio again shows variability, rising to around 74.37 days by November 2024, before a slight decrease to 70.93 days in February 2025. The sharp dip observed in early 2024 may indicate improved inventory management or adjustments to demand patterns.

Days of Sales Outstanding (DSO):
The DSO ratio measures the average number of days it takes to collect receivables. From August 2020 through May 2022, DSO fluctuated within a range of 53.43 to 73.88 days, with the highest levels observed in May 2021 (73.88 days) and August 2021 (73.25 days). Notably, a significant reduction occurred in May 2023, when DSO sharply decreased to approximately 19.70 days, implying a substantial enhancement in receivables collection efficiency. However, during subsequent periods, DSO increased again, reaching over 64 days by August 2023, before declining again to approximately 21.16 days in February 2024. The near-term fluctuations could reflect changes in credit policies, customer payment behavior, or operational adjustments.

Number of Days of Payables:
This metric indicates the average number of days the company takes to pay its suppliers. The data shows initial increasing trend from August 2020 (43.53 days) to May 2021 (77.22 days), suggesting an extension in payment periods. After peaking in May 2021, the ratio generally declined, reaching a low of approximately 11.35 days in February 2024, which may signal efforts to improve cash management or leverage early payment discounts. Subsequently, the days of payables increased again to around 45.13 days by May 2025, indicating a possible normalization or strategic shift in payment practices.

Overall Assessment:
Across the periods, the activity ratios depict a pattern of evolving operational efficiencies. The substantial reduction in days of inventory and receivables in early 2024 suggests enhanced inventory turnover and receivables collection, contributing to improved cash flow. The variability in days of payables indicates flexibility or strategic modulation in supplier payments. These ratios collectively reflect the company's dynamic approach to managing its inventory, receivables, and payables, with recent periods demonstrating efficiency improvements that could positively influence liquidity and operational performance.

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Long-term

The analysis of Worthington Industries Inc.'s long-term activity ratios reveals a nuanced trend over the specified periods. The Fixed Asset Turnover ratio, which measures the company's efficiency in utilizing its fixed assets to generate sales, exhibited fluctuations from August 2020 through November 2023. Initially, the ratio was relatively stable around 4.96 in August 2020 and 4.91 in November 2020, indicating consistent utilization of fixed assets. From February 2021 to May 2021, the ratio increased modestly from 5.01 to 5.76, suggesting improved efficiency in deploying fixed assets for sales generation. The trend continued upward, reaching a peak of 7.04 in August 2022, which may imply enhanced asset efficiency or a period of higher sales relative to fixed assets. However, subsequent data points reflect a downward trend, with the ratio declining to 6.98 in November 2022 and further decreasing to 5.67 in February 2023, and continuing down to 5.36 in May 2023 and 5.06 in August 2023. The ratio further declined to 4.83 in November 2023, approaching levels observed in 2020.

In contrast, the Total Asset Turnover ratio displays a different pattern. Starting at 0.93 in both August and November 2020, it exhibited minor fluctuations through 2021 and into 2022, reaching a high of 1.62 in November 2022. This indicates an overall trend of increasing efficiency in generating sales from total assets during this period. Post-November 2022, there is a notable decline: the ratio fell sharply to 1.27 in February 2023, then continued to decrease to 1.14 in May 2023 and further to 1.13 in August 2023. The decline became more pronounced in late 2023, with ratios dropping to 1.08 in November 2023, and moving further downward to 0.70 in February 2024, 0.69 in May 2024, and 0.68 in August 2024 and May 2025, respectively. These movements suggest a decline in overall asset efficiency in generating sales, especially after the peak in late 2022.

Overall, the fixed asset turnover ratio trend indicates an initial period of improved utilization, followed by a consistent decrease, pointing to potential challenges in maintaining asset efficiency in the shorter term. Conversely, the total asset turnover ratio initially improved, peaking in late 2022, but subsequently experienced a marked decline, which may reflect broader efficiency concerns or changes in asset utilization effectiveness. These ratios highlight shifts in operational efficiency and asset management effectiveness over the analyzed periods.