Watts Water Technologies Inc (WTS)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 4.31 | 4.47 | 4.28 | 5.09 | 5.26 |
| Receivables turnover | 7.88 | 8.44 | 8.16 | 7.57 | 7.22 |
| Payables turnover | 13.06 | 12.51 | 11.05 | 12.19 | 11.52 |
| Working capital turnover | 3.13 | 3.45 | 3.98 | 3.77 | 5.03 |
Watts Water Technologies, Inc.'s activity ratios provide insight into how effectively the company is managing its inventory, receivables, payables, and working capital.
1. Inventory Turnover:
The inventory turnover ratio measures how efficiently the company is managing its inventory. A higher ratio indicates that the company is selling its inventory more quickly. Over the past five years, Watts Water's inventory turnover has slightly decreased from 3.42 in 2019 to 2.74 in 2023. This could suggest that the company is holding onto its inventory for a longer period.
2. Receivables Turnover:
The receivables turnover ratio reflects how quickly the company is collecting payments from its customers. Watts Water's receivables turnover has shown a consistent trend of improvement from 7.28 in 2019 to 7.91 in 2023. This indicates that the company has been collecting payments from customers more efficiently over the years.
3. Payables Turnover:
The payables turnover ratio evaluates how long it takes for the company to pay its suppliers. Watts Water's payables turnover has been relatively stable over the years, with a slight increase from 7.49 in 2019 to 8.31 in 2023. A higher payables turnover ratio indicates that the company is taking fewer days to pay its suppliers.
4. Working Capital Turnover:
The working capital turnover ratio measures how effectively the company is utilizing its working capital to generate revenues. Watts Water's working capital turnover has shown a declining trend from 5.07 in 2019 to 3.14 in 2023. A lower working capital turnover could suggest that the company's revenue generation efficiency has decreased over the years.
Overall, a detailed analysis of Watts Water Technologies, Inc.'s activity ratios indicates fluctuations in inventory turnover and working capital turnover, while the receivables turnover and payables turnover show relatively stable trends over the past five years. Further examination and comparison with industry standards could provide additional insights into the company's operational efficiency and financial performance.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 84.67 | 81.57 | 85.38 | 71.68 | 69.42 |
| Days of sales outstanding (DSO) | days | 46.29 | 43.26 | 44.72 | 48.25 | 50.57 |
| Number of days of payables | days | 27.95 | 29.17 | 33.03 | 29.94 | 31.69 |
Watts Water Technologies, Inc.'s activity ratios provide insights into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.
Firstly, looking at the Days of Inventory on Hand (DOH), we observe an increasing trend from 106.81 days in 2019 to 133.05 days in 2023. This indicates that the company is holding onto inventory for a longer period, which may tie up capital and increase carrying costs.
Next, examining the Days of Sales Outstanding (DSO), we see a generally decreasing trend from 50.13 days in 2019 to 46.12 days in 2023. This suggests that the company is collecting receivables more quickly, translating to improved cash flow and potentially reduced bad debts.
Finally, considering the Number of Days of Payables, we note fluctuations over the years but a slight decline from 48.76 days in 2019 to 43.92 days in 2023. A lower number of days of payables indicates that the company is paying its suppliers more promptly, which could affect cash flow management and relationships with vendors.
In conclusion, while Watts Water Technologies, Inc. has seen some improvements in managing receivables, there may be opportunities to optimize inventory levels and further enhance the efficiency of payables to strengthen working capital management and overall financial performance.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 8.25 | 10.02 | 8.98 | 7.04 | 7.93 |
| Total asset turnover | 0.89 | 1.02 | 0.97 | 0.86 | 0.92 |
The fixed asset turnover ratio for Watts Water Technologies, Inc. has shown a declining trend over the past five years, indicating that the company's ability to generate sales from its fixed assets has decreased. In contrast, the total asset turnover ratio has varied year over year but has generally remained below 1. This suggests that the company's overall efficiency in generating sales from its total assets has been relatively low.
A high fixed asset turnover ratio is generally preferred as it indicates efficient utilization of fixed assets to generate sales. However, the decreasing trend in this ratio for Watts Water Technologies may raise concerns about the company's asset efficiency and the effectiveness of its fixed asset investments. On the other hand, the total asset turnover ratio below 1 implies that the company may not be effectively utilizing its total assets to generate sales revenue.
Further analysis and comparison with industry benchmarks would be necessary to understand the underlying factors contributing to these ratios and to assess the company's performance in terms of asset efficiency and utilization.