Worthington Steel Inc (WS)

Short-term

Turnover ratios

The analysis of Worthington Steel Inc's activity ratios over the specified periods indicates several key trends and insights regarding operational efficiency and asset utilization.

Inventory Turnover:
The inventory turnover ratio demonstrates a general upward trend from August 2022 to August 2023. The ratio increased from 6.45 in August 2022 to 7.89 in May 2023 and maintained that level through August 2023. This suggests an improvement in inventory management, with the company turning over its inventory more frequently, likely indicating increased sales efficiency or better inventory control during this period. However, from May 2024 to May 2025, the ratio declines from 7.38 to 6.41, implying a potential slowdown in sales volume or an accumulation of inventory, leading to less frequent inventory turnover.

Receivables Turnover:
The receivables turnover ratio was unavailable for August 2022 and August 2023, but from May 2023 to May 2025, it shows a slight decline from 7.75 to 7.05. This indicates a marginal elongation in the collection period for receivables, which could suggest slight inefficiencies in receivables management or extended credit terms extended to customers over time.

Payables Turnover:
Payables turnover was not available as of August 2022 and 2023, yet it decreased from 8.33 in May 2023 to 7.86 in May 2024 and further to 6.72 in May 2025. The declining trend reflects a lengthening of the payment cycle to suppliers, potentially signaling deliberately extended payment terms, improved cash management, or liquidity considerations.

Working Capital Turnover:
Working capital turnover shows a steady increase from 6.68 in August 2022 to 7.19 in May 2023 and August 2023. This indicates enhanced efficiency in utilizing working capital to generate sales. The ratio jumps notably to 8.95 in May 2024, suggesting further improvement in operational efficiency or sales volume relative to working capital employed. However, this ratio decreases to 7.42 in May 2025, which, while still higher than earlier levels, indicates a slight reduction in efficiency or a relative change in working capital levels.

Summary of Trends:
- The company experienced improved inventory turnover up to August 2023, with potential signs of inventory buildup or sales slowdown in subsequent periods.
- Receivables and payables turnover ratios indicate slight elongation in collection and payment cycles over the recent periods, reflecting possible strategic credit and payment policies or liquidity management adjustments.
- Working capital turnover improved significantly by May 2024 but saw a minor decline thereafter, suggesting maintained or slightly reduced efficiency in deploying working capital to support sales.

Overall, the activity ratios depict an organization that effectively managed its inventory and working capital up to the middle of the period analyzed but faced slight downward pressures on turnover efficiency in the later periods. The company’s liquidity and operational workflows appear to be adjusting, potentially in response to market conditions, credit policies, or strategic initiatives.

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Average number of days

The activity ratios for Worthington Steel Inc., specifically focusing on inventory turnover, receivables collection, and payables management, demonstrate notable trends over the analyzed periods.

Days of Inventory on Hand (DOH):
In August 2022, the company’s inventory was held for an average of 56.59 days. By May 2023, this figure had decreased significantly to 46.28 days, indicating an improvement in inventory turnover and potentially enhanced inventory management efficiency. This reduced duration was maintained through August 2023. However, a slight increase to 49.46 days was observed by May 2024, suggesting a modest slowdown or strategic accumulation of inventory. The DOH then extended further to 56.95 days by May 2025, exceeding the levels seen in August 2022, which may indicate either increased inventory holdings or potential inventory obsolescence concerns.

Days of Sales Outstanding (DSO):
Data on DSO was available for May 2023 onward, with 47.08 days indicating the average collection period during that time. This duration increased slightly to 50.73 days by May 2024, and further to 51.78 days by May 2025. The upward trend suggests a gradual elongation in the receivables collection cycle, which may reflect more lenient credit policies, difficulties in collection, or changes in customer payment behaviors.

Number of Days of Payables:
For the period ending May 2023, the company’s payables period was 43.80 days. This extended marginally to 46.42 days by May 2024 and further to 54.32 days by May 2025. The increasing trend implies that Worthington Steel Inc. is taking longer to settle its payables over time, which could indicate a strategic delay in payments to conserve cash, improved negotiations with suppliers, or potential strains in cash flow management.

Summary of Trends:
Overall, the analysis indicates that in recent periods, Worthington Steel Inc. has been managing its inventory somewhat more efficiently initially, as evidenced by the decrease in DOH from August 2022 to May 2023. However, this efficiency slightly diminished after May 2023, with an increase in inventory days by May 2025. The lengthening of the receivables and payables cycles over the same period suggests a trend toward extended credit to customers and delayed payments to suppliers. These patterns could reflect strategic operational decisions or underlying liquidity considerations, and they warrant further analysis to assess their impact on the company's overall working capital management.

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Long-term

The analysis of Worthington Steel Inc’s long-term activity ratios reveals insights into the company’s asset utilization efficiency over the recent periods. The Fixed Asset Turnover ratio, measuring how effectively fixed assets generate sales, was 7.96 as of August 31, 2022. This ratio declined slightly to 7.38 by May 31, 2023, and remained stable at 7.38 through August 31, 2023, indicating consistency in asset utilization during this interval. The absence of subsequent data prevents further assessment of trends beyond August 2023.

In terms of Total Asset Turnover, which assesses overall asset efficiency in generating sales, the ratio was approximately 1.95 on August 31, 2022. This increased to 2.05 by May 31, 2023, and maintained the same level at August 31, 2023. The subsequent periods show a decline to 1.84 as of May 31, 2024, and further decrease to 1.58 by May 31, 2025. This downward trend reflects a diminishing efficiency in utilizing total assets to produce sales over time, suggesting possible changes in asset base, operational adjustments, or shifts in sales productivity.

Overall, while fixed asset utilization has remained relatively stable in the recent periods, the decline in total asset turnover indicates a reduction in the overall efficiency of asset deployment in generating sales. The stability in fixed asset turnover alongside declining total asset turnover may suggest that the company’s fixed assets remain consistently productive, but other assets or operational components are less effective in supporting sales growth.