Watsco Inc (WSO)
Inventory turnover
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cost of revenue (ttm) | US$ in thousands | 5,291,620 | 5,250,510 | 5,175,560 | 5,273,320 | 5,244,050 | 5,196,130 | 5,011,080 | 4,844,560 | 4,612,647 | 4,385,369 | 4,248,379 | 3,912,869 | 3,832,113 | 3,771,435 | 3,668,745 | 3,676,425 | 3,613,402 | 3,543,290 | 3,460,068 | 3,428,178 |
| Inventory | US$ in thousands | 1,347,290 | 1,549,740 | 1,689,310 | 1,614,290 | 1,370,170 | 1,385,190 | 1,480,520 | 1,390,300 | 1,115,470 | 1,042,140 | 1,044,610 | 986,648 | 781,299 | 884,653 | 854,368 | 942,815 | 920,786 | 970,475 | 967,394 | 893,640 |
| Inventory turnover | 3.93 | 3.39 | 3.06 | 3.27 | 3.83 | 3.75 | 3.38 | 3.48 | 4.14 | 4.21 | 4.07 | 3.97 | 4.90 | 4.26 | 4.29 | 3.90 | 3.92 | 3.65 | 3.58 | 3.84 |
December 31, 2023 calculation
Inventory turnover = Cost of revenue (ttm) ÷ Inventory
= $5,291,620K ÷ $1,347,290K
= 3.93
Inventory turnover is a key financial ratio that measures how effectively a company is managing its inventory levels. It indicates the number of times a company's inventory is sold and replaced over a specific period. For Watsco Inc., the inventory turnover ratio has been relatively stable over the past eight quarters, ranging from a low of 3.06 in Q2 2023 to a high of 3.93 in Q4 2023.
A high inventory turnover ratio suggests that Watsco Inc. is efficiently managing its inventory by quickly selling and replenishing its products. This can be advantageous as it reduces the risk of holding obsolete or unsold inventory, freeing up cash flow and reducing storage costs. Conversely, a low inventory turnover ratio may indicate overstocking or slow-moving inventory, which can tie up capital and lead to potential write-offs.
Overall, Watsco Inc.'s inventory turnover ratio indicates a moderate efficiency in managing its inventory levels, with room for improvement in potentially optimizing inventory levels to enhance operational performance and profitability. A consistent monitoring and analysis of this ratio can help the company make informed decisions regarding inventory management strategies.