Watts Water Technologies Inc (WTS)

The current ratio measures Watts Water Technologies Inc's ability to cover its short-term liabilities with its short-term assets. Over the past five years, the company's current ratio has fluctuated, ranging from 2.11 to 2.61. This indicates that the company has maintained a healthy level of current assets relative to its current liabilities. Generally, a current ratio above 2 signifies strong liquidity and indicates the company can easily cover its short-term obligations.

The quick ratio, which is a more stringent measure of liquidity as it excludes inventory from current assets, reflects Watts Water Technologies Inc's ability to meet its short-term liabilities without relying on the sale of inventory. The company's quick ratio has shown a similar fluctuation, ranging from 0.59 to 0.93 over the same period. While the ratios are generally below 1, indicating potential liquidity challenges in some periods, the upward trend from 0.59 to 0.93 is positive and suggests an improvement in short-term liquidity position.

The cash ratio, which is the most conservative measure of liquidity as it considers only cash and cash equivalents, has remained consistent at 0.70 to 0.93 across the years. This indicates that Watts Water Technologies Inc has a stable ability to cover its short-term liabilities using only its readily available cash reserves.

Overall, based on the analysis of the liquidity ratios, Watts Water Technologies Inc has maintained a relatively healthy liquidity position over the years, with the current and cash ratios showing strength, although there may be some fluctuations in the quick ratio. However, it is essential for the company to continue monitoring these ratios to ensure it maintains sufficient liquidity to cover its short-term obligations.

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Additional liquidity measure

The cash conversion cycle of Watts Water Technologies Inc has been fluctuating over the past five years. As of December 31, 2020, the company's cash conversion cycle was 108.94 days, indicating that it took approximately 108.94 days for the company to convert its investment in inventory into cash.

By December 31, 2021, the cash conversion cycle increased to 129.84 days, suggesting that the company's ability to convert inventory into cash slowed down. However, by December 31, 2022, there was a slight improvement as the cash conversion cycle decreased to 124.04 days.

Despite the improvement in 2022, the cash conversion cycle rose again to 133.05 days by December 31, 2023, indicating a longer period for the company to convert its investments into cash. The trend reversed in the following year, with the cash conversion cycle decreasing to 120.25 days by December 31, 2024.

Overall, fluctuations in the cash conversion cycle suggest varying efficiencies in managing working capital and converting investments into cash over the years. It is essential for Watts Water Technologies Inc to continuously monitor and optimize its cash conversion cycle to enhance operational efficiency and maintain healthy cash flows.