Watts Water Technologies Inc (WTS)

Watts Water Technologies, Inc. has shown a consistent improvement in its liquidity over the past five years based on its liquidity ratios. The current ratio has increased steadily from 1.75 in 2019 to 2.61 in 2023, indicating the company's ability to meet its short-term obligations using its current assets. This suggests that the company has sufficient current assets to cover its current liabilities, providing a buffer for unexpected financial needs.

Similarly, the quick ratio has also shown an upward trend, increasing from 1.11 in 2019 to 1.63 in 2023. This ratio excludes inventory from current assets, providing a more conservative measure of liquidity. The increasing trend indicates that the company has been efficiently managing its liquidity and is less reliant on inventory to meet its short-term obligations.

Furthermore, the cash ratio has also improved steadily over the years, reaching 0.99 in 2023 from 0.58 in 2019. This ratio measures the company's ability to cover its current liabilities with its cash and cash equivalents alone. The increasing cash ratio suggests that Watts Water Technologies, Inc. has been strengthening its cash position, which is essential for financial stability and resilience in times of economic uncertainty.

Overall, the improving liquidity ratios of Watts Water Technologies, Inc. over the past five years indicate a healthy financial position and efficient management of short-term assets and liabilities. This bodes well for the company's ability to navigate potential challenges and capitalize on growth opportunities in the future.

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Additional liquidity measure

The cash conversion cycle of Watts Water Technologies, Inc. has shown fluctuations over the past five years. The company's cash conversion cycle has increased from 108.18 days in 2019 to 135.25 days in 2023, indicating a lengthening time period for the company to convert its investments in inventory into cash receipts from customers.

The increase in the cash conversion cycle suggests that Watts Water Technologies may be experiencing challenges in efficiently managing its working capital, potentially due to a slower collection of accounts receivable or a buildup of inventory levels.

It is important for the company to monitor and improve its cash conversion cycle to ensure optimal utilization of its resources and to enhance liquidity. By focusing on streamlining its operations, improving inventory turnover, and expediting accounts receivable collections, Watts Water Technologies can enhance its overall financial performance and efficiency.