Cintas Corp. (NASDAQ:CTAS)

The financial data reveals several notable trends and shifts in operational efficiency over the evaluated periods.

Inventory Turnover

The inventory turnover ratio declined steadily from 11.25 in 2019 to a low of 7.89 in 2021, indicating slower inventory movement during this timeframe. Subsequently, the ratio improved, reaching 11.97 by 2024, surpassing the initial 2019 level. This suggests enhanced inventory management and more efficient stock utilization in the most recent period.

Receivables Turnover

The receivables turnover ratio exhibited minor fluctuations, increasing from 7.57 in 2019 to a peak of 8.14 in 2020, before gradually declining to approximately 7.65–7.71 between 2022 and 2024. This relatively stable range indicates consistent efficiency in collecting receivables over time.

Payables Turnover

The payables turnover ratio remained relatively stable around 16.6 from 2019 through 2022, but then declined to 14.48 by 2024. This downward trend implies a lengthening of payment periods to suppliers, suggesting possible changes in credit terms or cash flow management strategies.

Working Capital Turnover

The working capital turnover ratio experienced a decrease from 6.22 in 2019 to 4.97 in 2020, indicating less efficient use of working capital. It then recovered to 7.83 in 2021, dropped again in 2023, and finally rose to 7.07 by 2024. These fluctuations reflect variability in operational efficiency and asset utilization during the period.

Average Inventory Processing Period

The average inventory processing period lengthened from 32 days in 2019 to 46 days in 2021, pointing to a slower turnover of inventory. Afterward, the period shortened progressively to 30 days in 2024, consistent with the improvement seen in inventory turnover, indicating a return to faster inventory processing.

Average Receivable Collection Period

This period remained relatively stable around 45 to 48 days throughout the years, signaling steady effectiveness in collecting accounts receivable without significant changes in credit policies or customer payment behavior.

Operating Cycle

The operating cycle, which aggregates inventory and receivable periods, increased from 80 days in 2019 to a peak of 92 days in 2021, then shortened to 77 days by 2024. This suggests a period of reduced operational efficiency followed by marked improvement in more recent years.

Average Payables Payment Period

The payables payment period remained constant at 22 days until 2022, but then extended to 25 days by 2024. An extended payment period may reflect strategic management of payable terms to preserve cash or respond to supplier negotiations.

Cash Conversion Cycle

The cash conversion cycle lengthened from 58 days in 2019 to 70 days in 2021, reflecting a slower conversion of investments into cash. After 2021, it declined steadily to 52 days in 2024, indicating an overall improvement in operational cash flow efficiency in recent years.

Cost of Revenue

The cost of revenue exhibited a generally upward trend over the analyzed periods. Starting at approximately 3.76 billion US dollars in May 2019, it increased steadily each year with a notable rise to about 4.91 billion US dollars by May 2024. This represents a significant increase indicating higher expenses related to revenue generation over time.

Inventories, Net

The net inventories demonstrated a fluctuating pattern. They increased from around 335 million US dollars in May 2019 to a peak of roughly 507 million in May 2023, followed by a considerable decline to 410 million in May 2024. This suggests variability in inventory levels, with a recent reduction after a period of accumulation.

Inventory Turnover Ratio

The inventory turnover ratio showed varying movements throughout the periods. Initially, it decreased from 11.25 in May 2019 to 7.89 by May 2021, indicating slower inventory movement. Afterwards, it increased again, reaching 11.97 by May 2024. The initial decline followed by a recovery suggests that inventory management efficiency experienced some challenges but improved significantly in the latest year.

Revenue Trends

The revenue figures show a consistent upward trajectory over the examined periods, increasing from approximately $6.89 billion in May 2019 to nearly $9.60 billion in May 2024. This steady growth reflects an overall positive performance and expansion over the six-year period, with the most significant increments occurring between 2021 and 2023.

Accounts Receivable Movements

Accounts receivable demonstrate a progressive increase in absolute terms, rising from about $910 million in May 2019 to approximately $1.24 billion by May 2024. This rise indicates higher outstanding customer balances correlating with increased revenue, suggesting either expanding sales on credit or longer collection periods.

Receivables Turnover Ratio Analysis

The receivables turnover ratio remains relatively stable, fluctuating narrowly between 7.57 and 8.14 from May 2019 through May 2024. This stability suggests that despite the rising accounts receivable and revenue, the company has maintained consistent efficiency in collecting its receivables, with no significant deterioration in credit collection policies or effectiveness.

Overall Financial Insights

The alignment of increasing revenue with growing accounts receivable, combined with a steady receivables turnover ratio, indicates balanced growth. The company appears to manage its credit and collection processes effectively relative to its sales increases. There is no immediate indication of worsening liquidity or collection issues based on these metrics during the observed timeframe.

Cost of Revenue

The cost of revenue has shown a consistent upward trend throughout the observed periods. Starting from approximately 3.76 billion US dollars in 2019, it increased each year, reaching about 4.91 billion US dollars by 2024. This steady rise indicates increasing expenses associated with generating revenue, which could be reflective of growth in sales volume, rising input costs, or changes in the cost structure.

Accounts Payable

Accounts payable also exhibited an increasing trend over the years. Beginning at 226 million US dollars in 2019, the balance rose steadily to 339 million US dollars by 2024. This increase may indicate extended credit terms with suppliers, higher purchase volumes, or delayed payments, aligning with the rising cost of revenue.

Payables Turnover Ratio

The payables turnover ratio has declined gradually from 16.65 in 2019 to 14.48 in 2024. This downward movement suggests that the company is taking longer to settle its accounts payable relative to its purchases. The decrease implies potential changes in payment policy, liquidity management, or negotiation of supplier terms.

Working Capital

The working capital exhibited fluctuation throughout the observed periods. Initially, there was an increase from 1,108,547 thousand US$ in 2019 to 1,424,504 thousand US$ in 2020. This was followed by a decline in 2021 to 909,224 thousand US$, with a recovery and significant growth recorded in 2023, reaching 1,708,397 thousand US$. It then decreased again to 1,356,688 thousand US$ in 2024. Overall, working capital showed volatility with peaks in 2020 and 2023.

Revenue

Revenue presented a consistent upward trend over the entire timeframe. Starting at 6,892,303 thousand US$ in 2019, revenue gradually increased each year without any reversal, reaching 9,596,615 thousand US$ in 2024. The growth between 2021 and 2023 was particularly noticeable, indicating sustained improvement in sales performance.

Working Capital Turnover

The working capital turnover ratio showed variability in contrast to revenue's steady growth. The ratio decreased from 6.22 in 2019 to 4.97 in 2020, suggesting a lower efficiency in using working capital to generate revenue during that year. In 2021, it surged to 7.83, the highest level in the period analyzed, implying improved efficiency. The ratio then declined to 5.16 in 2023 before rising again to 7.07 in 2024. These fluctuations indicate changing operational efficiency or working capital management effectiveness over time.

Summary

In summary, revenue growth was steady and continuous, reflecting favorable market or operational conditions. Working capital levels, however, were more volatile, with no consistent trend, affecting the working capital turnover ratio which also fluctuated. The periods of higher turnover ratio suggest intervals during which the company was more effective in converting working capital into revenue, while lower ratios may point to less efficient capital usage or strategic shifts affecting short-term assets and liabilities.

Inventory Turnover

The inventory turnover ratio exhibits a fluctuating trend over the observed periods. Starting at 11.25 in May 2019, it declines steadily to a low of 7.89 in May 2021. Subsequently, the ratio improves, increasing to 8.94 in May 2022 and further to 9.16 in May 2023. The most recent data from May 2024 shows a significant increase to 11.97, surpassing the initial value from 2019. This pattern suggests periods of reduced efficiency in inventory utilization during 2020 and 2021, followed by a recovery and eventual enhancement in inventory management effectiveness by 2024.

Average Inventory Processing Period

The average inventory processing period demonstrates an inverse relationship to the inventory turnover ratio, as expected. Beginning at 32 days in May 2019, this metric increases progressively to 46 days by May 2021, indicating a lengthening of the time inventory remains before sale. The period then decreases to 41 days in May 2022 and continues to drop to 40 days in May 2023. By May 2024, the processing period further shortens to 30 days, which is the lowest in the observed timeframe. This shortening period aligns with the improved inventory turnover ratio noted in the same period, reflecting enhanced efficiency in inventory management and faster inventory turnover.

Overall Insights

The data reveals an initial challenge in inventory management, with declining turnover ratios and extended processing periods through 2021. However, the subsequent trends indicate a strategic correction leading to improved turnover rates and reduced holding times. By the most recent fiscal year, inventory management appears more efficient than at the start of the period, suggesting strengthened operational controls and potentially better demand forecasting or inventory practices.

Receivables Turnover

The receivables turnover ratio showed moderate fluctuations over the six-year period. It increased from 7.57 in 2019 to a peak of 8.14 in 2020, indicating improved efficiency in collecting receivables during that year. Following this peak, the ratio experienced a gradual decline to 7.65 by 2023, suggesting a slight decrease in collection efficiency. In 2024, there was a minor recovery to 7.71, though it remained below the 2020 high.

Average Receivable Collection Period

The average collection period inversely mirrored the receivables turnover trend, beginning at 48 days in 2019 and improving to the lowest value of 45 days in 2020, consistent with faster collection of receivables during that year. Subsequently, the period gradually increased, returning to 48 days in 2023, which reflects slower collection efficiency. In 2024, there was a slight improvement to 47 days, indicating a marginal acceleration in receivables collection compared to the previous year.

Overall Trend Analysis

The data reveals a general pattern where receivable collection efficiency was strongest in 2020, followed by a gradual decline through 2023. The small improvements in 2024 suggest initial efforts to enhance collection practices. However, despite these improvements, the collection period and turnover ratio have not yet returned to the optimal levels seen in 2020. The company's receivables management appears to face modest challenges in maintaining peak efficiency over the longer term.

The data reveals trends in the company's operating efficiency over a six-year period ending in May 2024. The focus is on inventory management, receivables collection, and the overall operating cycle.

Average Inventory Processing Period

The inventory processing period shows considerable fluctuation. It increased significantly from 32 days in 2019 to a peak of 46 days in 2021, indicating slower inventory turnover during that period. Subsequently, it decreased steadily to 30 days by 2024, which suggests an improvement in managing inventory and faster turnover toward the end of the period.

Average Receivable Collection Period

The receivable collection period remained relatively stable throughout the period, ranging narrowly between 45 and 48 days. This consistency indicates that the company's credit and collection policies have been maintained steadily with only minor variations from year to year.

Operating Cycle

The operating cycle, which combines the average inventory processing and receivable collection periods, exhibits a pattern that reflects the trends in inventory management. It increased from 80 days in 2019 to 92 days in 2021, corresponding with the highest inventory processing period observed. Following this, the cycle shortened to 77 days by 2024, reflecting improvements primarily driven by shorter inventory processing times while receivables collection remained stable.

Overall, the analysis indicates that after a period of increasing operational cycle length driven by slower inventory processing, the company has improved efficiency by reducing inventory days significantly in recent periods. Receivables management has been consistent, suggesting stable credit terms and collections. The improved operating cycle by the latest year demonstrates enhanced working capital management and operational effectiveness.

Payables Turnover

The payables turnover ratio shows a slight declining trend over the analyzed period. It started at 16.65 in May 2019 and remained relatively stable through May 2022, fluctuating minimally between 16.47 and 16.79. However, from May 2023 onward, the ratio fell more noticeably to 15.36 and further declined to 14.48 by May 2024. This downward trend indicates that the frequency with which payables are paid off has decreased, suggesting slower payments to suppliers over time.

Average Payables Payment Period

The average payables payment period remained constant at 22 days for the first four years, from May 2019 through May 2022. Starting in May 2023, it increased to 24 days and further extended to 25 days in May 2024. This increase aligns with the observed decrease in payables turnover, implying that the company is taking longer to settle its payables, reflecting a longer cash conversion cycle in terms of payables management.

Overall Insights

The data suggests a shift in the company's payment behavior beginning around 2023, with a gradual elongation in the duration taken to pay suppliers. This change could be indicative of strategic cash flow management decisions, possibly aimed at preserving liquidity during recent periods. However, the increasing payment period and declining turnover ratio may also warrant monitoring, as prolonged payment terms can affect supplier relationships.

Inventory Processing Period

The average inventory processing period showed an overall fluctuating trend from 2019 to 2024. It increased from 32 days in 2019 to a peak of 46 days in 2021, indicating that inventory was held longer during this period. After 2021, the period decreased steadily to 30 days by 2024, suggesting improved efficiency in inventory turnover in the most recent year.

Receivable Collection Period

The average receivable collection period remained relatively stable throughout the six-year period. It started at 48 days in 2019, decreased slightly to 45 days in 2020, and then hovered around 46 to 48 days in subsequent years, ending at 47 days in 2024. This indicates a consistent collection timeframe of receivables without significant deviations.

Payables Payment Period

The average payables payment period was steady at 22 days from 2019 through 2022. Starting in 2023, a gradual increase occurred, reaching 25 days in 2024. This suggests a modest extension in the time taken to settle payables, potentially reflecting changes in payment terms or cash management strategies.

Cash Conversion Cycle

The cash conversion cycle exhibited variability across the period analyzed. It increased from 58 days in 2019 to a peak of 70 days in 2021, denoting a less efficient conversion of investments in inventory and receivables into cash. Following 2021, the cycle shortened significantly to 52 days by 2024, reflecting improved operational efficiency and working capital management in recent years.