Woodward Inc (WWD)

Short-term

Turnover ratios

The activity ratios of Woodward Inc, as indicated by its inventory turnover, receivables turnover, payables turnover, and working capital turnover, provide insights into the company's operational efficiency and management of key working capital components.

1. Inventory turnover: The inventory turnover ratio measures the efficiency of converting inventory into sales. Woodward Inc's inventory turnover has been relatively stable over the past five years, ranging from 4.08 to 4.96 times. A higher inventory turnover indicates that the company is selling its products more quickly, which can be seen as a positive sign.

2. Receivables turnover: The receivables turnover ratio reflects how efficiently the company is collecting its accounts receivable. Woodward Inc's receivables turnover has shown a fluctuating trend over the five-year period, ranging from 5.74 to 6.96 times. A higher receivables turnover implies that the company is collecting its receivables faster, which is generally favorable for cash flow management.

3. Payables turnover: The payables turnover ratio measures how quickly a company is paying its suppliers. Woodward Inc's payables turnover has been relatively consistent but decreasing over the years, indicating that the company may be taking longer to pay its suppliers. While a higher payables turnover could suggest efficient cash management, companies must strike a balance between maintaining good relationships with suppliers and managing cash effectively.

4. Working capital turnover: The working capital turnover ratio assesses how efficiently a company uses its working capital to generate revenue. Woodward Inc's working capital turnover has shown an increasing trend over the five-year period, indicating improved efficiency in utilizing its working capital to support sales growth.

Overall, Woodward Inc's performance in activity ratios reflects reasonably efficient management of inventory, receivables, payables, and working capital over the years, with room for improvement in optimizing payables turnover for more balanced working capital management.

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Average number of days

Activity ratios provide insights into how efficiently a company manages its resources and operations. Let's analyze Woodward Inc's activity ratios based on the data provided:

1. Days of Inventory on Hand (DOH):
- Woodward Inc's DOH has been fluctuating over the past five years, ranging from 73.56 days to 89.52 days. In the most recent year, the DOH was 79.60 days, indicating that, on average, the company holds inventory for approximately 80 days before it is sold.
- A higher DOH may suggest excess inventory levels, tying up capital and potentially signaling inefficiencies in inventory management. Conversely, a lower DOH may indicate effective inventory turnover and working capital management.

2. Days of Sales Outstanding (DSO):
- The DSO for Woodward Inc has varied between 52.45 days and 63.61 days over the five-year period. In the latest year, the DSO stands at 52.45 days, implying that, on average, it takes the company about 52 days to collect its accounts receivable.
- A lower DSO typically indicates efficient credit and collection policies, leading to faster cash conversion. On the contrary, a higher DSO may suggest credit control issues or customers taking longer to pay, impacting cash flow.

3. Number of Days of Payables:
- The number of days of payables for Woodward Inc has shown some volatility, ranging from 22.55 days to 40.12 days. As of the latest year, the company takes approximately 38 days to pay its suppliers (37.57 days).
- A longer payment period could indicate extended credit terms negotiated with suppliers, potentially benefiting cash flow. However, excessively delaying payments may harm supplier relationships or signal financial distress.

In conclusion, analyzing Woodward Inc's activity ratios reveals valuable insights into the efficiency of its inventory management, accounts receivable collection, and accounts payable processes. Continuous monitoring and potential improvements in these areas can enhance overall operational effectiveness and financial performance.

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Long-term

Woodward Inc's long-term activity ratios show improvements in both fixed asset turnover and total asset turnover over the past five years.

The fixed asset turnover has gradually increased from 2.47 in 2020 to 3.55 in 2024, indicating that the company is generating more revenue from its fixed assets. This improvement suggests that Woodward Inc is utilizing its fixed assets more efficiently to generate sales.

Similarly, the total asset turnover has also shown an increasing trend, from 0.63 in 2020 to 0.76 in 2024. This indicates that the company has been more effective in generating sales relative to its total assets over the years.

Overall, the increasing trend in both fixed asset turnover and total asset turnover ratios suggests that Woodward Inc has been able to improve its asset utilization efficiency, which can have positive implications for the company's overall operational performance and profitability.