Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Hubbell Inc., liquidity ratios
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Current ratio | 1.86 | 1.76 | 1.67 | 1.86 | 1.96 | |
| Quick ratio | 1.10 | 0.91 | 0.95 | 1.04 | 1.10 | |
| Cash ratio | 0.42 | 0.28 | 0.28 | 0.23 | 0.24 |
Based on: 10-K (reporting date: 2022-12-31), 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).
The liquidity position from 2018 to 2022 exhibits a period of moderate contraction followed by a significant recovery, particularly in the final reporting year. Overall, a sufficient margin of safety was maintained to meet short-term obligations, although the composition of liquid assets fluctuated during the mid-period.
- Current Ratio
- A U-shaped trend is observed, with the ratio declining from 1.96 in 2018 to a five-year low of 1.67 in 2020, before recovering to 1.86 by the end of 2022. This movement indicates a temporary tightening of working capital followed by a restoration of the current asset buffer.
- Quick Ratio
- The quick ratio experienced a consistent downward trend from 1.10 in 2018 to 0.91 in 2021. The dip below the 1.0 threshold between 2020 and 2021 suggests a temporary increase in reliance on inventory to cover current liabilities. However, a sharp rebound to 1.10 in 2022 indicates a restoration of highly liquid assets relative to short-term debt.
- Cash Ratio
- The cash ratio remained relatively stable between 0.23 and 0.28 from 2018 through 2021. A notable increase occurred in 2022, where the ratio rose to 0.42, the highest level in the analyzed period. This represents a substantial strengthening of the most conservative liquidity measure, reflecting a greater proportion of cash and cash equivalents available for the immediate settlement of liabilities.
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Current Ratio
Hubbell Inc., current ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | 2,021,400) | 1,879,300) | 1,587,600) | 1,574,200) | 1,643,700) | |
| Current liabilities | 1,088,500) | 1,065,200) | 948,200) | 844,900) | 839,300) | |
| Liquidity Ratio | ||||||
| Current ratio1 | 1.86 | 1.76 | 1.67 | 1.86 | 1.96 | |
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Boeing Co. | 1.22 | 1.33 | — | — | — | |
| Caterpillar Inc. | 1.39 | 1.46 | — | — | — | |
| Eaton Corp. plc | 1.38 | 1.04 | — | — | — | |
| GE Aerospace | 1.16 | 1.28 | — | — | — | |
| Honeywell International Inc. | 1.25 | 1.30 | — | — | — | |
| Lockheed Martin Corp. | 1.32 | 1.42 | — | — | — | |
| RTX Corp. | 1.09 | 1.19 | — | — | — | |
| Current Ratio, Sector | ||||||
| Capital Goods | 1.22 | 1.31 | — | — | — | |
| Current Ratio, Industry | ||||||
| Industrials | 1.20 | 1.29 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Current ratio = Current assets ÷ Current liabilities
= 2,021,400 ÷ 1,088,500 = 1.86
2 Click competitor name to see calculations.
An evaluation of the short-term liquidity position from 2018 to 2022 reveals a consistent ability to cover short-term obligations, with the current ratio remaining significantly above the 1.0 threshold throughout the period. While a moderate contraction in the liquidity margin occurred between 2018 and 2020, a recovery trend was established in the subsequent two years.
- Current Asset Trends
- Current assets experienced a slight decline between 2018 and 2019, moving from 1,643,700 to 1,574,200 thousand US$. This was followed by a period of robust growth, with assets increasing to 1,879,300 thousand US$ in 2021 and reaching 2,021,400 thousand US$ by the end of 2022, reflecting a total increase of approximately 22.9% from the 2018 level.
- Current Liability Trends
- Current liabilities exhibited a steady upward trajectory over the analyzed timeframe. From a baseline of 839,300 thousand US$ in 2018, liabilities grew to 1,088,500 thousand US$ by 2022. The most pronounced increases occurred between 2019 and 2021, coinciding with the general expansion of the balance sheet.
- Current Ratio Analysis
- The current ratio opened the period at 1.96 in 2018 and reached a minimum of 1.67 in 2020. This compression was primarily driven by current liabilities growing at a faster rate than current assets during that interval. Following the 2020 trough, the ratio improved to 1.76 in 2021 and returned to 1.86 in 2022, indicating a restoration of the liquidity cushion and a stabilization of working capital management.
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Quick Ratio
Hubbell Inc., quick ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 440,500) | 286,200) | 259,600) | 182,000) | 189,000) | |
| Short-term investments | 14,300) | 9,400) | 9,300) | 14,200) | 9,200) | |
| Accounts receivable, net of allowances | 741,600) | 675,300) | 634,700) | 683,000) | 725,400) | |
| Total quick assets | 1,196,400) | 970,900) | 903,600) | 879,200) | 923,600) | |
| Current liabilities | 1,088,500) | 1,065,200) | 948,200) | 844,900) | 839,300) | |
| Liquidity Ratio | ||||||
| Quick ratio1 | 1.10 | 0.91 | 0.95 | 1.04 | 1.10 | |
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Boeing Co. | 0.32 | 0.34 | — | — | — | |
| Caterpillar Inc. | 0.79 | 0.89 | — | — | — | |
| Eaton Corp. plc | 0.73 | 0.54 | — | — | — | |
| GE Aerospace | 0.81 | 0.93 | — | — | — | |
| Honeywell International Inc. | 0.88 | 0.94 | — | — | — | |
| Lockheed Martin Corp. | 1.09 | 1.15 | — | — | — | |
| RTX Corp. | 0.69 | 0.81 | — | — | — | |
| Quick Ratio, Sector | ||||||
| Capital Goods | 0.64 | 0.71 | — | — | — | |
| Quick Ratio, Industry | ||||||
| Industrials | 0.71 | 0.80 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 1,196,400 ÷ 1,088,500 = 1.10
2 Click competitor name to see calculations.
The liquidity position of Hubbell Inc., as measured by the quick ratio, exhibited a U-shaped trajectory over the five-year period from 2018 to 2022. After beginning at 1.10 in 2018, the ratio declined for three consecutive years, reaching a minimum of 0.91 in 2021, before returning to 1.10 by the end of 2022.
- Quick Asset Trends
- Total quick assets showed initial volatility, decreasing from 923,600 thousand US$ in 2018 to 879,200 thousand US$ in 2019. A sustained upward trend followed, with assets increasing to 903,600 thousand US$ in 2020, 970,900 thousand US$ in 2021, and reaching a peak of 1,196,400 thousand US$ in 2022.
- Current Liability Trends
- Current liabilities demonstrated a consistent increase throughout the analysis period. Obligations rose from 839,300 thousand US$ in 2018 to 1,088,500 thousand US$ in 2022. The growth was most aggressive between 2019 and 2021, which placed downward pressure on the liquidity ratio during those years.
- Quick Ratio Interpretation
- The erosion of the quick ratio from 1.10 in 2018 to 0.91 in 2021 indicates a period where current liabilities grew at a faster rate than liquid assets. The drop below the 1.0 threshold in 2020 and 2021 suggests a temporary phase where quick assets were insufficient to cover total current liabilities. The recovery to 1.10 in 2022 was driven by a substantial increase in quick assets that outpaced the growth of liabilities, restoring the company's immediate short-term solvency to its 2018 level.
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Cash Ratio
Hubbell Inc., cash ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cash and cash equivalents | 440,500) | 286,200) | 259,600) | 182,000) | 189,000) | |
| Short-term investments | 14,300) | 9,400) | 9,300) | 14,200) | 9,200) | |
| Total cash assets | 454,800) | 295,600) | 268,900) | 196,200) | 198,200) | |
| Current liabilities | 1,088,500) | 1,065,200) | 948,200) | 844,900) | 839,300) | |
| Liquidity Ratio | ||||||
| Cash ratio1 | 0.42 | 0.28 | 0.28 | 0.23 | 0.24 | |
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Boeing Co. | 0.19 | 0.20 | — | — | — | |
| Caterpillar Inc. | 0.22 | 0.31 | — | — | — | |
| Eaton Corp. plc | 0.09 | 0.08 | — | — | — | |
| GE Aerospace | 0.44 | 0.54 | — | — | — | |
| Honeywell International Inc. | 0.51 | 0.59 | — | — | — | |
| Lockheed Martin Corp. | 0.16 | 0.26 | — | — | — | |
| RTX Corp. | 0.16 | 0.22 | — | — | — | |
| Cash Ratio, Sector | ||||||
| Capital Goods | 0.26 | 0.32 | — | — | — | |
| Cash Ratio, Industry | ||||||
| Industrials | 0.32 | 0.39 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 454,800 ÷ 1,088,500 = 0.42
2 Click competitor name to see calculations.
The analysis of the cash ratio from 2018 to 2022 reveals a general improvement in the immediate liquidity position of the entity. While both cash assets and current liabilities have trended upward over the five-year period, the growth in cash reserves has outpaced the accumulation of short-term obligations, resulting in a strengthened capacity to cover liabilities with liquid assets.
- Cash Asset Growth
- Total cash assets remained relatively stagnant between 2018 and 2019, moving from 198.2 million USD to 196.2 million USD. A period of growth followed, with assets increasing to 268.9 million USD in 2020 and 295.6 million USD in 2021. A significant surge was observed in 2022, with cash assets reaching 454.8 million USD, marking a substantial increase in the entity's cash reserves.
- Current Liabilities Expansion
- Current liabilities exhibited a consistent upward trend throughout the analyzed timeframe. Obligations rose from 839.3 million USD in 2018 to 1.088 billion USD by the end of 2022. This steady increase suggests a growing volume of short-term financial commitments.
- Cash Ratio Trajectory
- The cash ratio experienced a slight contraction from 0.24 in 2018 to 0.23 in 2019, before stabilizing at 0.28 during 2020 and 2021. A sharp improvement occurred in 2022, where the ratio rose to 0.42. This progression indicates that the entity's ability to satisfy its current liabilities using only cash and cash equivalents improved significantly, ending the period at its highest liquidity level.
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