Constellation Brands Inc. (NYSE:STZ)

The analysis of liquidity ratios over the reported quarters reveals several notable trends and fluctuations.

Current Ratio

The current ratio demonstrates a generally fluctuating but slightly increasing pattern over the timeframe. Initial values around 1.19 rose steadily to peaks near 1.81 by mid-2018 and 2.4 in early 2021, indicating improved short-term liquidity at these points. However, intermittent declines followed each peak, with the most recent quarters showing a moderate decrease to approximately 1.29 by late 2022. This suggests that while the company often maintained or improved its ability to cover current liabilities with current assets, there were periods of contraction in liquid asset availability relative to short-term obligations.

Quick Ratio

The quick ratio follows a similar but more variable trend compared to the current ratio, reflecting more sensitivity to the company’s most liquid assets excluding inventory. Beginning at 0.35, the ratio generally increased with some volatility, reaching highs near 0.98 in mid-2021. After this peak, a decline is evident, with ratios returning to the range of 0.41 by late 2022. This pattern suggests fluctuating levels of readily available assets to meet current liabilities, possibly influenced by changes in inventory levels, receivables, or other quick assets.

Cash Ratio

The cash ratio, indicating the company’s capacity to cover current liabilities solely with cash and cash equivalents, exhibited low values throughout the period, mostly below 0.1 in the early years. However, there were pronounced spikes notably around early 2021 reaching approximately 0.36, indicating temporary increases in cash reserves relative to current liabilities. Aside from these spikes, the cash ratio mostly remained low and showed variability, declining again toward the end of the dataset. This reflects a generally conservative cash position except for short-term surges, which may be due to specific operational or strategic cash management decisions.

Overall, the liquidity profile of the business appears dynamic, with intermittent periods of enhanced liquidity notably visible in the current and quick ratios during 2018 and early 2021. These improved liquidity levels may point to strategic capital management or operational performance improvements during those times. Conversely, the repeated declines following these peaks highlight challenges in sustaining high liquidity levels consistently. The relatively low and variable cash ratio suggests limited reliance on cash alone to meet current obligations, possibly indicative of a working capital structure balanced with other current assets.

Current Assets

The current assets exhibited some fluctuations over the observed periods, starting at approximately 3,218,500 thousand USD in May 2016 and reaching a peak near 3,684,000 thousand USD by February 2019. After this peak, there was a general downward trend with occasional recoveries, ultimately nearing 3,525,900 thousand USD towards the end of 2022. This pattern indicates moderate volatility but a relatively stable aggregate level within the range of about 3,200,000 to 3,600,000 thousand USD over the six-year duration.

Current Liabilities

The current liabilities showed more pronounced variability. Starting at roughly 2,698,700 thousand USD in May 2016, liabilities decreased to about 2,090,000 thousand USD in mid-2017 but spiked significantly during late 2018, reaching approximately 3,363,400 thousand USD. This sharp increase indicates a substantial rise in short-term obligations during this period. Subsequently, liabilities declined again but remained variable, with values between around 1,260,000 and 2,720,000 thousand USD toward the later periods, showing no clear consistent upward or downward trajectory.

Current Ratio

The current ratio, reflecting short-term liquidity by comparing current assets to current liabilities, varied notably throughout the timeframe. There were initial values around 1.19 to 1.61 in the early years, with some peaks reaching up to 2.40 in May 2021, indicating a high coverage of liabilities by current assets at certain points. The ratio experienced significant dips, such as the low of 1.08 in November 2018, coinciding with the spike in current liabilities previously noted. In the latter periods, the ratio remained mostly above 1.2 but below 1.5, indicating a moderate liquidity position without extreme fluctuations.

Overall Analysis

The company's short-term financial position demonstrates periodic volatility in both assets and liabilities. The spikes in current liabilities, particularly in late 2018, suggest temporary increases in short-term obligations which compressed liquidity, reflected in a lowered current ratio. However, the company maintained a current ratio generally above 1.0, indicating an ability to cover current liabilities with current assets throughout the observed periods. The upward spikes in the current ratio imply moments of strengthened liquidity potentially due to improved asset management or reduced short-term debt. The fluctuations in current assets and liabilities could be influenced by operational cycles, investment activities, or strategic financing decisions. Overall, the data indicates a liquidity profile that, while variable, does not present consistent risk of short-term insolvency.

The analysis of the quarterly financial data over the period from May 2016 to November 2022 reveals notable fluctuations in liquidity as reflected by the total quick assets, current liabilities, and the quick ratio.

Total Quick Assets

Total quick assets exhibit a generally volatile pattern with some periods of increase followed by declines. Initial values around 940,600 thousand USD in mid-2016 rise to peaks exceeding 1,157,300 thousand USD in August 2018. Subsequent quarters show variability, with assets dipping below 900,000 thousand USD at times, for example in May 2019 and November 2019, before recovering above 1,100,000 thousand USD again in August 2021. The latest recorded figures in late 2022 hover just above and below 1,100,000 thousand USD, indicating a moderately stable but fluctuating liquidity base.

Current Liabilities

Current liabilities show significant variability with abrupt changes throughout the periods. Initial liabilities were approximately 2,698,700 thousand USD in mid-2016 but decreased to about 1,946,700 thousand USD in early 2018. A notable spike occurred in late 2018 with liabilities increasing to over 3,363,400 thousand USD, which later receded to levels closer to 1,269,100 thousand USD by mid-2021. Liabilities trend upward again in late 2021 through 2022, reaching 2,725,000 thousand USD by November 2022. The fluctuations suggest changes in short-term obligations possibly influenced by operating or financing strategies.

Quick Ratio

The quick ratio, indicating short-term liquidity position, follows a varied trajectory. Ratios stayed mostly below 0.6 throughout the period, generally signaling that quick assets were insufficient to cover current liabilities without relying on inventory. Peaks are observed in May 2021 with a ratio close to 0.98, which is the highest in the timeframe and suggests a relatively stronger liquidity position during that quarter. Other notable increases occur in mid-2017 and mid-2018, whereas the lowest ratios around 0.29 to 0.30 appear in late 2018 and early 2019, reflecting tighter liquidity constraints then.

Overall, the data demonstrate a pattern of fluctuating liquidity with several cycles of strengthening and weakening quick asset coverage relative to current liabilities. The increases in quick ratio during mid-2021 may indicate improved liquidity management or reduced short-term obligations, whereas periods of low ratios and spikes in current liabilities suggest episodic challenges in maintaining optimal short-term financial stability.

The financial data reveals notable volatility and fluctuations across several key metrics over the observed periods.

Total Cash Assets

Total cash assets demonstrate considerable variability throughout the quarters. Initially, there is a general upward trend from May 2016, peaking at 210,000 thousand USD in May 2018. Subsequently, the asset value declines and shows intermittent recovery phases. A significant increase is evident in May 2020, reaching 302,800 thousand USD, followed by another prominent peak in February 2021 at 460,600 thousand USD, and the highest recorded value in May 2021 at 503,800 thousand USD. This suggests periods of enhanced liquidity or cash inflows during 2020-2021, which later retracts with values falling to 165,100 and 185,000 thousand USD towards the end of 2022.

Current Liabilities

Current liabilities fluctuate markedly, with a general downward tendency from May 2016 (approximately 2,698,700 thousand USD) to a low around February 2021 (1,269,100 thousand USD). Thereafter, current liabilities increase sharply, reversing the earlier decline, peaking again at 2,725,000 thousand USD by November 2022. Such increases and decreases could reflect changes in operational scale, short-term obligations, or working capital management strategies.

Cash Ratio

The cash ratio, which measures the company’s ability to cover its current liabilities with cash and cash equivalents, remains generally low but exhibits considerable swings. Initially, the ratio is around 0.06 to 0.09 through 2016 and early 2017, indicating low liquidity coverage. Some dips happen toward late 2018 and early 2019 (down to 0.03), followed by notable spikes in mid-2020 and early 2021, with the highest ratio at 0.36 in May 2021. This aligns with the peaks in total cash assets and coincides with the trough in current liabilities, implying improved liquidity positions during this period. Post-mid-2021, the cash ratio declines again to low single-digit levels by the end of 2022, mirroring decreases in cash assets and increases in current liabilities.

Overall, the company's liquidity profile is characterized by periods of constrained cash coverage interspersed with episodes of significant liquidity improvements, particularly during 2020-2021. The fluctuations in current liabilities suggest dynamic working capital management or external financial influences affecting short-term obligations. These patterns may highlight responses to market conditions, financing activities, or operational adjustments over time.