Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Long-term Activity Ratios (Summary)
Generac Holdings Inc., long-term (investment) activity ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The analysis of investment activity ratios between 2017 and 2021 reveals a divergence between the efficiency of fixed asset utilization and the overall productivity of the asset and equity bases. While fixed asset efficiency showed a strong recovery and peak toward the end of the period, total asset and equity turnover exhibited a general decline, suggesting a shift in the company's capital structure or investment scale relative to revenue growth.
- Net Fixed Asset Turnover
- The standard net fixed asset turnover remained relatively stable from 2017 to 2020, oscillating between 6.95 and 7.26, before increasing significantly to 8.48 in 2021. This indicates a marked improvement in the ability to generate sales from net fixed investments in the final year. However, the ratio including right-of-use assets shows a different pattern, declining from 7.26 in 2017 to a low of 6.12 in 2020. The gap between these two metrics suggests that the recognition of operating leases increased the asset base without a proportional immediate increase in revenue during the middle of the period.
- Total Asset Turnover
- A period of absolute stability is observed from 2017 through 2019, with the ratio holding constant at 0.83. A subsequent decline occurred in 2020, with the ratio dropping to 0.77 and remaining at that level through 2021. This downward movement indicates a slight decrease in the overall efficiency of the total asset base in generating top-line growth.
- Equity Turnover
- A consistent and pronounced downward trend is evident in equity turnover, which fell from 2.99 in 2017 to 1.69 in 2021. This steady decline suggests that shareholders' equity grew at a significantly faster rate than revenues over the five-year period, resulting in a reduction of the revenue generated per unit of equity investment.
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Net Fixed Asset Turnover
Generac Holdings Inc., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 3,737,184) | 2,485,200) | 2,204,336) | 2,023,464) | 1,672,445) | |
| Property and equipment, net | 440,852) | 343,936) | 316,976) | 278,929) | 230,380) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 8.48 | 7.23 | 6.95 | 7.25 | 7.26 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 5.70 | — | — | — | — | |
| Caterpillar Inc. | 3.99 | — | — | — | — | |
| Eaton Corp. plc | 6.41 | — | — | — | — | |
| GE Aerospace | 5.47 | — | — | — | — | |
| Honeywell International Inc. | 6.18 | — | — | — | — | |
| Lockheed Martin Corp. | 8.83 | — | — | — | — | |
| RTX Corp. | 4.30 | — | — | — | — | |
| Net Fixed Asset Turnover, Sector | ||||||
| Capital Goods | 5.46 | — | — | — | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Industrials | 2.72 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net fixed asset turnover = Net sales ÷ Property and equipment, net
= 3,737,184 ÷ 440,852 = 8.48
2 Click competitor name to see calculations.
Analysis of the investment activity ratios reveals a consistent expansion in both revenue generation and the asset base, culminating in a significant increase in operational efficiency by the end of the observed period.
- Net Sales and Asset Expansion
- Net sales exhibited a steady upward trajectory, increasing from 1,672,445 thousand USD in 2017 to 3,737,184 thousand USD in 2021. During the same timeframe, net property and equipment grew from 230,380 thousand USD to 440,852 thousand USD. This parallel growth indicates a strategic scaling of the company's physical infrastructure to support rising demand.
- Net Fixed Asset Turnover Trends
- The net fixed asset turnover ratio remained relatively stable between 2017 and 2020, fluctuating between 6.95 and 7.26. A notable shift occurred in 2021, when the ratio increased to 8.48. This indicates that the acceleration in net sales during the final year significantly outpaced the growth of the fixed asset base, resulting in higher productivity per unit of net fixed asset.
The data suggests that while the company has continued to invest in its long-term asset base, the efficiency of these assets improved substantially in 2021. The shift from a stable turnover rate to a higher peak indicates a more optimized utilization of property and equipment to drive revenue growth.
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Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Generac Holdings Inc., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 3,737,184) | 2,485,200) | 2,204,336) | 2,023,464) | 1,672,445) | |
| Property and equipment, net | 440,852) | 343,936) | 316,976) | 278,929) | 230,380) | |
| Operating lease ROU assets (recorded in Operating lease and other assets) | 101,266) | 62,030) | 35,950) | —) | —) | |
| Property and equipment, net (including operating lease, right-of-use asset) | 542,118) | 405,966) | 352,926) | 278,929) | 230,380) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 6.89 | 6.12 | 6.25 | 7.25 | 7.26 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Boeing Co. | 5.04 | — | — | — | — | |
| Caterpillar Inc. | 3.79 | — | — | — | — | |
| Eaton Corp. plc | 5.60 | — | — | — | — | |
| GE Aerospace | 4.55 | — | — | — | — | |
| Honeywell International Inc. | 5.28 | — | — | — | — | |
| Lockheed Martin Corp. | 7.54 | — | — | — | — | |
| RTX Corp. | 3.80 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Capital Goods | 4.80 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Industrials | 2.34 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Net sales ÷ Property and equipment, net (including operating lease, right-of-use asset)
= 3,737,184 ÷ 542,118 = 6.89
2 Click competitor name to see calculations.
Net sales exhibited consistent growth from 2017 to 2021, rising from $1.67 billion to $3.74 billion. During this same period, net property and equipment, including operating lease right-of-use assets, increased steadily from $230.4 million to $542.1 million, indicating a sustained expansion of the company's asset base to support increasing operational scale.
- Net Fixed Asset Turnover Trend
- The net fixed asset turnover ratio remained nearly constant between 2017 and 2018 at approximately 7.26. However, a downward trend was observed from 2019 to 2020, with the ratio declining to 6.25 and then to 6.12. This decline indicates that during these years, the growth in fixed asset investments exceeded the growth in sales, resulting in lower relative asset efficiency.
- Efficiency Recovery and Asset Utilization
- A reversal of the downward trend occurred in 2021, as the ratio increased to 6.89. This recovery was driven by a significant surge in net sales, which outpaced the increase in net fixed assets. The movement suggests that the capacity expanded in previous years was more effectively utilized in 2021 to generate higher revenue, improving the overall efficiency of the investment in long-term assets.
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Total Asset Turnover
Generac Holdings Inc., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 3,737,184) | 2,485,200) | 2,204,336) | 2,023,464) | 1,672,445) | |
| Total assets | 4,877,780) | 3,235,423) | 2,665,669) | 2,426,314) | 2,019,964) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.77 | 0.77 | 0.83 | 0.83 | 0.83 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 0.45 | — | — | — | — | |
| Caterpillar Inc. | 0.58 | — | — | — | — | |
| Eaton Corp. plc | 0.58 | — | — | — | — | |
| GE Aerospace | 0.36 | — | — | — | — | |
| Honeywell International Inc. | 0.53 | — | — | — | — | |
| Lockheed Martin Corp. | 1.32 | — | — | — | — | |
| RTX Corp. | 0.40 | — | — | — | — | |
| Total Asset Turnover, Sector | ||||||
| Capital Goods | 0.50 | — | — | — | — | |
| Total Asset Turnover, Industry | ||||||
| Industrials | 0.58 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Total asset turnover = Net sales ÷ Total assets
= 3,737,184 ÷ 4,877,780 = 0.77
2 Click competitor name to see calculations.
A comprehensive review of the financial data from 2017 to 2021 indicates a period of substantial growth in both top-line revenue and the asset base, accompanied by a slight decline in asset utilization efficiency.
- Revenue and Asset Expansion
- Net sales demonstrated a consistent upward trajectory, increasing from 1,672,445 thousand US dollars in 2017 to 3,737,184 thousand US dollars by 2021. Parallel to this growth, total assets expanded from 2,019,964 thousand US dollars to 4,877,780 thousand US dollars over the same five-year period.
- Total Asset Turnover Trend
- The total asset turnover ratio remained stagnant at 0.83 from 2017 through 2019. However, a downward shift occurred in 2020, with the ratio falling to 0.77, a figure that remained unchanged through the end of 2021.
- Efficiency Analysis
- The transition in the turnover ratio suggests that the growth rate of total assets exceeded the growth rate of net sales during the 2020 and 2021 fiscal years. While the company successfully scaled its operations and increased revenue, the marginal decrease in the ratio indicates a reduction in the efficiency with which assets are being deployed to generate sales.
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Equity Turnover
Generac Holdings Inc., equity turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 3,737,184) | 2,485,200) | 2,204,336) | 2,023,464) | 1,672,445) | |
| Stockholders’ equity attributable to Generac Holdings Inc. | 2,213,774) | 1,390,293) | 1,032,382) | 760,549) | 559,552) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 1.69 | 1.79 | 2.14 | 2.66 | 2.99 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.92 | — | — | — | — | |
| Eaton Corp. plc | 1.20 | — | — | — | — | |
| GE Aerospace | 1.76 | — | — | — | — | |
| Honeywell International Inc. | 1.85 | — | — | — | — | |
| Lockheed Martin Corp. | 6.12 | — | — | — | — | |
| RTX Corp. | 0.88 | — | — | — | — | |
| Equity Turnover, Sector | ||||||
| Capital Goods | 2.28 | — | — | — | — | |
| Equity Turnover, Industry | ||||||
| Industrials | 2.63 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Equity turnover = Net sales ÷ Stockholders’ equity attributable to Generac Holdings Inc.
= 3,737,184 ÷ 2,213,774 = 1.69
2 Click competitor name to see calculations.
Between 2017 and 2021, a diverging trend is observed between revenue growth and the efficiency of equity utilization. While the organization experienced substantial growth in top-line sales, the pace of equity accumulation exceeded the pace of revenue expansion, leading to a steady decline in the equity turnover ratio.
- Net Sales Performance
- Net sales exhibited continuous growth throughout the analyzed period, rising from US$ 1,672,445 thousand in 2017 to US$ 3,737,184 thousand in 2021. The most significant acceleration occurred between 2020 and 2021, where sales increased by approximately 50%.
- Equity Expansion
- Stockholders' equity attributable to the company grew aggressively from US$ 559,552 thousand in 2017 to US$ 2,213,774 thousand by the end of 2021. This represents a near-fourfold increase over the five-year span, indicating a significant increase in the capital base.
- Equity Turnover Trend
- The equity turnover ratio followed a consistent downward trajectory, decreasing from 2.99 in 2017 to 1.69 in 2021. This contraction indicates that the company is generating fewer dollars of sales for every dollar of stockholders' equity. The decline suggests that the expansion of the equity base has outpaced the growth in net sales, which may reflect a transition in capital intensity or a period of significant capital accumulation that has not yet been fully leveraged to drive proportional sales growth.
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