Roper Technologies Inc. (NASDAQ:ROP)

The analysis of the liquidity ratios over the five-year period reveals a general decline in the company’s short-term financial health, with some fluctuations.

Current Ratio

The current ratio decreased from 1.11 in 2018 to 0.67 in 2022, indicating a weakening ability to cover current liabilities with current assets. This downward trend suggests a growing liquidity risk, with the ratio consistently falling below 1.0 from 2019 onwards.

Quick Ratio

The quick ratio, which excludes inventory from current assets, also showed a declining pattern, dropping from 0.85 in 2018 to a low of 0.41 in 2021 before slightly improving to 0.56 in 2022. This indicates a reduced capacity to meet immediate obligations without relying on inventory sales, highlighting potential cash flow constraints during this period.

Cash Ratio

The cash ratio fluctuated within the examined years, beginning at 0.25 in 2018, peaking slightly at 0.3 in 2019, and reaching a low of 0.11 in 2021. It rebounded to 0.27 in 2022, suggesting that while the company experienced some pressure on its most liquid assets, there was a recovery in cash reserves in the latest year.

Overall, the liquidity profile shows a trend of weakening short-term financial strength between 2018 and 2021, followed by partial recovery by the end of 2022. This pattern may indicate challenges in managing working capital that required attention toward the latter part of the period under review.

Current Assets Trend

Current assets exhibited fluctuations over the period analyzed. Starting at 1,610,700 thousand US dollars in 2018, there was a notable increase to 1,999,500 thousand US dollars in 2019. This was followed by a decline to 1,752,300 thousand US dollars in 2020. Subsequently, current assets rose again, reaching a peak of 2,421,100 thousand US dollars in 2021, before falling to 1,932,400 thousand US dollars in 2022. Overall, current assets did not maintain steady growth but showed volatility.

Current Liabilities Trend

Current liabilities increased consistently over the reporting periods. Beginning at 1,448,200 thousand US dollars in 2018, current liabilities rose sharply to 2,397,400 thousand in 2019 and remained at a similar high level of 2,444,400 thousand in 2020. Thereafter, liabilities continued to increase, reaching 3,121,800 thousand in 2021, before slightly declining to 2,892,500 thousand in 2022. The trend indicates an overall growth in short-term obligations.

Current Ratio Analysis

The current ratio displayed a clear downward trend, indicating a weakening short-term liquidity position. The ratio started at 1.11 in 2018, which suggests sufficient current assets to cover current liabilities. However, in 2019, the ratio dropped below 1.0 to 0.83, reflecting a shift to a less favorable liquidity situation. This decline continued, reaching 0.72 in 2020, then slightly improving to 0.78 in 2021, but deteriorating further to 0.67 in 2022. These values consistently remained below 1.0 from 2019 onwards, signaling potential challenges in meeting short-term obligations purely from current assets.

Total Quick Assets

The total quick assets demonstrate variability over the period analyzed. Starting at 1,234,600 thousand US dollars in 2018, there was a noticeable increase to 1,684,800 thousand in 2019. This figure then declined to 1,413,000 thousand in 2020 and further to 1,286,200 thousand in 2021. By 2022, quick assets rebounded to 1,608,800 thousand, indicating partial recovery but still below the peak recorded in 2019.

Current Liabilities

Current liabilities experienced a consistent increase over the period. Beginning at 1,448,200 thousand US dollars in 2018, they rose sharply to 2,397,400 thousand in 2019. Liabilities continued to climb, reaching 2,444,400 thousand in 2020, and peaking at 3,121,800 thousand in 2021. In 2022, current liabilities decreased slightly to 2,892,500 thousand but remained considerably higher compared to 2018 levels.

Quick Ratio

The quick ratio shows a declining trend from 2018 through 2021, indicating a deteriorating short-term liquidity position. Starting at 0.85 in 2018, it dropped to 0.70 in 2019, then further fell to 0.58 in 2020 and reached its lowest point at 0.41 in 2021. A partial recovery occurred in 2022, with the quick ratio rising to 0.56, suggesting some improvement in the company's ability to meet immediate liabilities without depending on inventory sales.

Total cash assets

The total cash assets exhibited significant fluctuations over the analyzed period. Beginning at $364.4 million in 2018, cash assets peaked in 2019 at $709.7 million, followed by a notable decline to $308.3 million in 2020. A modest recovery occurred in 2021 with an increase to $351.5 million, and the highest value in the series was reached in 2022 at $792.8 million. This pattern suggests periods of both notable cash accumulation and utilization.

Current liabilities

Current liabilities showed a consistent upward trend from 2018 through 2021, rising from $1,448.2 million to a peak of $3,121.8 million in 2021. However, in 2022, current liabilities decreased to $2,892.5 million. Despite this reduction, the 2022 level remained substantially higher than the starting point in 2018, indicating an overall expansion in short-term obligations throughout the period.

Cash ratio

The cash ratio demonstrated volatility and generally low values, reflecting the company's short-term liquidity position relative to current liabilities. The ratio increased slightly from 0.25 in 2018 to 0.30 in 2019, before declining sharply to 0.13 in 2020 and further to 0.11 in 2021, indicating decreasing liquidity coverage during these years. In 2022, the ratio improved to 0.27, nearly returning to the initial level. This recovery aligns with the increase in cash assets and reduction in current liabilities observed in 2022.

Overall observations

The financial data reveal a dynamic liquidity position with significant cash asset volatility and a rising trend in current liabilities until 2021. The cash ratio's fluctuations suggest periods of constrained liquidity, notably in 2020 and 2021, followed by an improvement in 2022. The decline in current liabilities and resurgence in cash assets in 2022 contributed to this enhanced liquidity measure, potentially indicating improved short-term financial management or operational performance.