Analysis of Short-term (Operating) Activity Ratios
Quarterly Data
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
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Short-term Activity Ratios (Summary)
CoStar Group Inc., short-term (operating) activity ratios (quarterly data)
Based on: 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
The analysis of the quarterly financial metrics reveals several notable trends and shifts over the period examined.
- Receivables Turnover
- The receivables turnover ratio exhibited moderate fluctuations with a general tendency to decline in the most recent quarters. Starting around 13.4 to 15.1 in 2019, it peaked near 16.7 in mid-2021 before trending downward to approximately 12.4-12.8 by mid-2023. This suggests a lengthening in the time taken to collect receivables, indicating potentially slower cash inflows from customers over time.
- Payables Turnover
- The payables turnover ratio showed high volatility throughout the observed quarters. Early data reflected high turnover values above 34, which then drastically dipped starting in early 2020, falling below 20 and at times reaching as low as 7.3 by mid-2023. This considerable reduction signals an extension in payment terms to suppliers or delays in settling obligations, implying a weakening of payment velocity.
- Working Capital Turnover
- Working capital turnover demonstrated a clear decline beginning in the early part of 2020. Initially near 1.1 times, the ratio dropped sharply to around 0.4-0.5 from mid-2020 onward and maintained this depressed level without significant recovery through mid-2023. This pattern reflects a decrease in operational efficiency related to the use of working capital to generate sales, which may impact liquidity and resource management.
- Average Receivable Collection Period
- The average duration for collecting receivables ranged between 22 and 29 days. From about 24 days in late 2019, it slightly increased to reach near 29 days by mid-2023. This gradual rise aligns with the declining receivables turnover, further emphasizing a tendency for slower customer payments.
- Average Payables Payment Period
- The average payables payment period saw substantial elongation, moving from roughly 9-10 days in 2019 to a peak of about 50 days by mid-2023. The extension of payables days suggests the company has been delaying payments to suppliers over time, which might be a strategy to preserve cash or reflect liquidity constraints.
In summary, the financial trends suggest that over the period, the company experienced slower collection of receivables and significantly delayed payment of payables. While the working capital turnover declined and stabilized at a lower level, indicating reduced efficiency in utilizing working capital to support sales. These patterns collectively imply cautious cash management with extended supplier payment terms and a moderate slowdown in converting receivables to cash.
Turnover Ratios
Average No. Days
Receivables Turnover
CoStar Group Inc., receivables turnover calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q2 2023 Calculation
Receivables turnover
= (RevenuesQ2 2023
+ RevenuesQ1 2023
+ RevenuesQ4 2022
+ RevenuesQ3 2022)
÷ Accounts receivable, net
= ( + + + )
÷ =
- Revenue Trends
-
Revenues show a consistent upward trend over the entire period. Starting at approximately $328.4 million in the first quarter of 2019, revenues steadily increased each quarter, reaching $605.9 million by the second quarter of 2023. The growth appears continuous and smooth, without any notable declines or volatility, reflecting sustained business expansion.
- Accounts Receivable, Net
-
The accounts receivable balance exhibits a gradual increase over the examined quarters. Beginning at roughly $92.8 million in early 2019, this figure expands to approximately $181.2 million by mid-2023. There are some fluctuations within certain quarters, but the overall pattern is an upward trajectory. The increase in receivables aligns broadly with revenue growth but shows a somewhat faster rate of increase, especially starting in 2022.
- Receivables Turnover Ratio
-
The receivables turnover ratio shows variability while generally trending lower in recent quarters relative to earlier periods. In 2019, turnover ratios were mostly above 13, often reaching 15 or more, reflecting efficient collection of receivables. From early 2022 onwards, the ratio declines somewhat, reaching lows around 12.4 to 12.8. This indicates a slight weakening in the speed of converting receivables to cash, despite growth in revenues, which may suggest extended credit terms or slower collections.
- Insights and Analysis
-
The consistent revenue increases coupled with rising accounts receivable suggest growing sales volumes. However, the decreasing receivables turnover ratio in the latest periods points to a reduction in collection efficiency or changes in credit policies, leading to higher amounts tied up in receivables. This pattern could have implications for cash flow management and warrants monitoring to avoid potential liquidity constraints despite strong revenue performance.
Payables Turnover
CoStar Group Inc., payables turnover calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q2 2023 Calculation
Payables turnover
= (Cost of revenuesQ2 2023
+ Cost of revenuesQ1 2023
+ Cost of revenuesQ4 2022
+ Cost of revenuesQ3 2022)
÷ Accounts payable
= ( + + + )
÷ =
The financial data reflects certain trends and shifts in the company's cost structure and accounts payable management over the observed periods.
- Cost of Revenues
- The cost of revenues shows a gradual increase over the multi-year timeframe. Starting around $71 million in early 2019, it rises with some fluctuations, reaching values exceeding $119 million by early 2023. While the growth is not strictly linear, there is a notable upward trajectory, indicating increased expenditure or scale of operations contributing to cost of goods sold or service delivery.
- Accounts Payable
- Accounts payable display significant variability. The figures remain relatively moderate and stable through the first half of the timeline but see pronounced increases during certain intervals. From around $7-8 million in 2019, payables jump markedly in 2020, peaking above $31 million in mid-2022, and again reaching high values above $61 million by mid-2023. These sharp increases suggest changes in supplier credit terms, procurement volume, or cash management policies, possibly linked to working capital strategies or external pressures.
- Payables Turnover Ratio
- The payables turnover ratio exhibits an inverse pattern relative to accounts payable values. Early periods see ratios in the upper 30s and 40s, indicative of frequent payment cycles. However, as accounts payable amounts grow, the turnover ratio declines substantially, dropping from over 30 or more to as low as 7.3 by mid-2023. This suggests the company is taking longer to settle its payables, which may reflect altered cash flow management or negotiation of extended payment terms with suppliers.
In summary, the company’s operational costs are steadily increasing, accompanied by a strategic or necessary elongation of accounts payable periods. This results in higher outstanding payables and a decreasing payables turnover ratio, underscoring a shift toward more extended payment cycles. This pattern may impact liquidity and vendor relationships and warrants continued monitoring to balance operational funding needs and creditor management.
Working Capital Turnover
CoStar Group Inc., working capital turnover calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q2 2023 Calculation
Working capital turnover
= (RevenuesQ2 2023
+ RevenuesQ1 2023
+ RevenuesQ4 2022
+ RevenuesQ3 2022)
÷ Working capital
= ( + + + )
÷ =
The financial data reveals several notable trends over the examined quarters.
- Working Capital
- Working capital displayed a generally upward trajectory throughout the periods, starting from approximately $1.15 billion at the end of Q1 2019 and growing significantly to over $5 billion by Q2 2023. This increase suggests a strengthening in the company's short-term financial health, indicating an expansion in current assets relative to current liabilities over time. There were fluctuations, such as a dip in Q4 2019, but the overall progression was positive with pronounced growth particularly from Q2 2020 onward.
- Revenues
- Revenues demonstrated a consistent increasing trend across the quarters, rising from about $328 million in Q1 2019 to approximately $606 million in Q2 2023. The growth trajectory was steady without significant volatility, reflecting sustained demand or business expansion. The positive revenue trend throughout the periods indicates strong operational performance and potentially effective market penetration or product/service growth.
- Working Capital Turnover
- The working capital turnover ratio showed variability and an overall declining trend in early periods, beginning around 1.09 in Q1 2019 and declining sharply to below 0.5 by mid-2020. This indicates that the company generated less revenue per unit of working capital during this time, reflecting a reduced efficiency in utilizing working capital. The ratio stabilized somewhat in subsequent quarters, fluctuating around 0.45-0.54, but did not return to the levels observed at the start of the period. The decreased turnover ratio despite the growth in revenues and working capital suggests that working capital increased at a faster rate than revenues, possibly due to investments in inventory, receivables, or other current assets.
In summary, the company experienced significant growth in working capital and revenues, indicating expansion and improved capacity. However, the decline and stabilization at a lower level in working capital turnover suggest more capital is being tied up in operations relative to revenue generated, implying a need to monitor the efficiency of asset management moving forward.
Average Receivable Collection Period
CoStar Group Inc., average receivable collection period calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q2 2023 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =
- Receivables Turnover Ratio
- The receivables turnover ratio exhibited variability across the observed periods. Initially, it demonstrated an upward trend from 13.43 to a peak of 15.96 by the end of 2020, indicating an increasing efficiency in collecting receivables. This upward momentum continued into 2021 with values reaching above 16, suggesting a strong collection performance. However, from 2022 onward, a declining trend emerged, with the ratio falling to approximately 12.38 by the first half of 2023, reflecting a reduction in collection efficiency during this more recent timeframe.
- Average Receivable Collection Period
- The average receivable collection period followed an inverse pattern relative to the turnover ratio, which is consistent with financial principles. Starting at 27 days in early 2019, the period shortened to a low of 22-23 days by late 2020 and much of 2021, indicating faster collection of receivables during that interval. Beginning in 2022, the collection period lengthened gradually, reaching 29 days by mid-2023, suggesting slower receivable conversion to cash compared to previous years.
- Summary of Trends and Insights
- Overall, the data reflect improved receivables management and collection efficiency from 2019 through 2021, with shorter collection periods and higher turnover ratios. The subsequent reversal beginning in 2022 indicates a weakening in this area, possibly due to changes in credit policies, customer payment behavior, or market conditions. The increase in collection days and decrease in turnover ratio warrant attention, as they may impact cash flow and working capital management.
Average Payables Payment Period
CoStar Group Inc., average payables payment period calculation (quarterly data)
Based on: 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q2 2023 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ =
The analysis of the payables turnover ratio and the average payables payment period over the observed quarters reveals distinct changes and trends in the company's payment practices and supplier credit management.
- Payables Turnover Ratio
- Initially, the ratio fluctuated moderately around the mid-30s to 40s range during 2019, indicating relatively frequent payments to suppliers within that period.
- Starting from the first quarter of 2020, there is a sharp decline in the payables turnover ratio, dropping to the low teens and maintaining this lower level through the year. This decline suggests a significant slowdown in the frequency of payments to vendors.
- In 2021, the ratio saw some recovery, rising back into the high teens and low twenties, yet it remained well below the levels seen in 2019. This indicates a partial return towards quicker payment but not to the earlier pace.
- By 2022 and into the first half of 2023, the ratio once again declined noticeably, culminating at 7.3 in the most recent quarter, which is the lowest point in the entire period analyzed. This points to a substantial elongation in the payment cycle or potential changes in payment terms or cash management strategies.
- Average Payables Payment Period (in days)
- Complementary to the turnover ratio, the average payables payment period was consistently around 9 to 10 days for all quarters in 2019, reflecting rapid settlement of payables.
- This period extended significantly starting March 2020, with payment days increasing sharply to 28 and peaking at 33 days in mid-2020, indicating slower payment to suppliers.
- Throughout 2021, the payment period somewhat stabilized around 18 to 23 days, suggesting a moderate pace of payments.
- In 2022, the trend showed an increase to as many as 31 days, reverting to longer payment cycles, which somewhat eased in late 2022 but remained elevated compared to pre-2020 levels.
- The sharpest increase is noted in the first half of 2023, reaching 50 days in the latest quarter, pointing to a more pronounced extension of payment terms or delays in payments, consistent with the low payables turnover ratio observed.
Overall, the company's payables management reflects a clear shift from rapid supplier payments prior to 2020 towards longer payment cycles and lower turnover ratios from 2020 onward, with intermittent partial recovery. The lengthening of the average payment period and reduction in turnover ratio in the more recent quarters may signal changes in working capital strategies, supplier negotiations, or liquidity management, potentially impacting supplier relationships and financial flexibility.