Watsco Inc (WSO)
Inventory turnover
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cost of revenue | US$ in thousands | 5,573,600 | 5,291,630 | 5,244,060 | 4,612,650 | 3,832,110 |
| Inventory | US$ in thousands | 1,385,440 | 1,347,290 | 1,370,170 | 1,115,470 | 793,869 |
| Inventory turnover | 4.02 | 3.93 | 3.83 | 4.14 | 4.83 |
December 31, 2024 calculation
Inventory turnover = Cost of revenue ÷ Inventory
= $5,573,600K ÷ $1,385,440K
= 4.02
The inventory turnover ratio of Watsco Inc has shown a gradual decline over the past five years, decreasing from 4.83 in December 31, 2020, to 4.14 in December 31, 2021, further dropping to 3.83 in December 31, 2022. However, in the following years, there was a slight improvement with the ratio increasing to 3.93 in December 31, 2023, and then further to 4.02 in December 31, 2024.
A declining inventory turnover ratio may indicate that the company is holding onto its inventory for a longer period, which could potentially result in higher carrying costs and obsolescence risks. On the contrary, an increasing ratio suggests that the company is selling its inventory more efficiently.
In the context of Watsco Inc, the decreasing trend observed until 2022 might warrant a closer examination of its inventory management practices to identify areas for improvement. The subsequent increase in inventory turnover from 2023 to 2024 is a positive sign, suggesting potential improvements in managing inventory levels and sales strategies during those years.