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)
Trane Technologies plc, long-term (investment) activity ratios
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 analysis of investment activity ratios between 2018 and 2022 reveals a general trajectory of improving asset utilization and operational efficiency, despite a period of volatility centered around 2019 and 2020.
- Net Fixed Asset Turnover
- A consistent upward trend is observed, with the ratio increasing from 9.05 in 2018 to 10.41 in 2022. This indicates a progressive improvement in the ability to generate revenue from the net fixed asset base.
- Net Fixed Asset Turnover (including operating lease, right-of-use asset)
- A notable decline occurred in 2019, where the ratio dropped from 9.05 to 7.02. Following this adjustment, a steady recovery trend was maintained, reaching 8.00 by the end of 2022.
- Total Asset Turnover
- The ratio exhibited a V-shaped pattern, contracting from 0.87 in 2018 to a low of 0.69 in 2020. A subsequent recovery followed, with the ratio rising to 0.88 in 2022, signaling a return to baseline efficiency levels.
- Equity Turnover
- A decrease was recorded in 2020, with the ratio falling to 1.94 from 2.28 in 2019. This was followed by a strong upward trajectory, peaking at 2.63 in 2022, which reflects an increased capacity to generate sales relative to the equity invested.
Overall, the results suggest that while the company experienced a temporary contraction in asset and equity efficiency around 2020, the subsequent recovery across all measured ratios points to enhanced investment productivity by the end of the analyzed period.
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Net Fixed Asset Turnover
Trane Technologies plc, net fixed asset turnover 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) | ||||||
| Net revenues | 15,991,700) | 14,136,400) | 12,454,700) | 16,598,900) | 15,668,200) | |
| Property, plant and equipment, net | 1,536,100) | 1,398,800) | 1,349,500) | 1,806,200) | 1,730,800) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 10.41 | 10.11 | 9.23 | 9.19 | 9.05 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 6.31 | 5.70 | — | — | — | |
| Caterpillar Inc. | 4.70 | 3.99 | — | — | — | |
| Eaton Corp. plc | 6.59 | 6.41 | — | — | — | |
| GE Aerospace | 5.96 | 5.47 | — | — | — | |
| Honeywell International Inc. | 6.48 | 6.18 | — | — | — | |
| Lockheed Martin Corp. | 8.27 | 8.83 | — | — | — | |
| RTX Corp. | 4.42 | 4.30 | — | — | — | |
| Net Fixed Asset Turnover, Sector | ||||||
| Capital Goods | 5.79 | 5.46 | — | — | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Industrials | 2.94 | 2.72 | — | — | — | |
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
Net fixed asset turnover = Net revenues ÷ Property, plant and equipment, net
= 15,991,700 ÷ 1,536,100 = 10.41
2 Click competitor name to see calculations.
The analysis of long-term activity ratios from 2018 to 2022 reveals a progressive improvement in the efficiency of fixed asset utilization. While net revenues and property, plant, and equipment experienced significant fluctuations, the net fixed asset turnover ratio exhibited a steady and uninterrupted increase over the five-year period.
- Net Revenue Trends
- Net revenues grew from US$ 15.67 billion in 2018 to US$ 16.60 billion in 2019, followed by a sharp contraction to US$ 12.45 billion in 2020. A recovery phase ensued, with revenues rising to US$ 14.14 billion in 2021 and reaching US$ 15.99 billion by the end of 2022, nearly returning to the peaks observed in 2019.
- Fixed Asset Base Fluctuations
- The net value of property, plant, and equipment increased slightly from 2018 to 2019 before experiencing a significant reduction to US$ 1.35 billion in 2020. Subsequent years saw a gradual increase in the asset base, ending at US$ 1.54 billion in 2022, though this remained below the levels recorded in 2018 and 2019.
- Net Fixed Asset Turnover Performance
- The net fixed asset turnover ratio improved consistently from 9.05 in 2018 to 10.41 in 2022. Notably, the ratio remained resilient during the 2020 downturn, increasing slightly to 9.23 despite the drop in revenue. This indicates that the reduction in the fixed asset base was proportional to or exceeded the decline in revenues, preventing a loss in efficiency. The subsequent rise to 10.11 in 2021 and 10.41 in 2022 suggests a strong recovery where revenue growth significantly outpaced the expansion of fixed assets, resulting in higher productivity per unit of investment.
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Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Trane Technologies plc, net fixed asset turnover (including operating lease, right-of-use asset) 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) | ||||||
| Net revenues | 15,991,700) | 14,136,400) | 12,454,700) | 16,598,900) | 15,668,200) | |
| Property, plant and equipment, net | 1,536,100) | 1,398,800) | 1,349,500) | 1,806,200) | 1,730,800) | |
| Operating lease right-of-use assets (classified in Other noncurrent assets) | 462,500) | 436,800) | 409,000) | 560,000) | —) | |
| Property, plant and equipment, net (including operating lease, right-of-use asset) | 1,998,600) | 1,835,600) | 1,758,500) | 2,366,200) | 1,730,800) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 8.00 | 7.70 | 7.08 | 7.02 | 9.05 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Boeing Co. | 5.55 | 5.04 | — | — | — | |
| Caterpillar Inc. | 4.49 | 3.79 | — | — | — | |
| Eaton Corp. plc | 5.58 | 5.60 | — | — | — | |
| GE Aerospace | 5.08 | 4.55 | — | — | — | |
| Honeywell International Inc. | 5.58 | 5.28 | — | — | — | |
| Lockheed Martin Corp. | 7.27 | 7.54 | — | — | — | |
| RTX Corp. | 3.95 | 3.80 | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Capital Goods | 5.13 | 4.80 | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Industrials | 2.54 | 2.34 | — | — | — | |
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
Net fixed asset turnover (including operating lease, right-of-use asset) = Net revenues ÷ Property, plant and equipment, net (including operating lease, right-of-use asset)
= 15,991,700 ÷ 1,998,600 = 8.00
2 Click competitor name to see calculations.
The analysis of asset utilization from 2018 to 2022 reveals a period of volatility followed by a steady recovery in operational efficiency. The net fixed asset turnover ratio experienced a notable decline in the early part of the period before trending upward through 2022, indicating an improving ability to generate revenue from the company's investment in property, plant, equipment, and right-of-use assets.
- Net Fixed Asset Turnover Fluctuations
- A significant decrease in the turnover ratio is observed between 2018 and 2019, falling from 9.05 to 7.02. This decline corresponds with a substantial increase in net property, plant, and equipment, which rose from 1.73 billion to 2.37 billion during the same period. The growth in the asset base outpaced the growth in net revenues, leading to a temporary reduction in asset productivity.
- Impact of Revenue and Asset Volatility in 2020
- In 2020, net revenues experienced a sharp contraction, dropping to 12.45 billion. However, the net fixed asset turnover ratio remained relatively stable at 7.08. This stability was maintained because the net asset base also decreased significantly to 1.76 billion, effectively offsetting the decline in revenue and preventing a further collapse in the turnover ratio.
- Efficiency Recovery Trend (2021-2022)
- A consistent upward trend in asset efficiency is evident from 2021 through 2022, with the ratio rising to 7.70 and then to 8.00. This improvement is driven by a strong recovery in net revenues, which reached 15.99 billion by the end of 2022. While the net fixed asset base expanded modestly to 2.00 billion, the pace of revenue growth exceeded the pace of asset accumulation, resulting in enhanced capacity utilization and higher operational efficiency.
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Total Asset Turnover
Trane Technologies plc, total asset turnover 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) | ||||||
| Net revenues | 15,991,700) | 14,136,400) | 12,454,700) | 16,598,900) | 15,668,200) | |
| Total assets | 18,081,600) | 18,059,800) | 18,156,700) | 20,492,300) | 17,914,900) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.88 | 0.78 | 0.69 | 0.81 | 0.87 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 0.49 | 0.45 | — | — | — | |
| Caterpillar Inc. | 0.69 | 0.58 | — | — | — | |
| Eaton Corp. plc | 0.59 | 0.58 | — | — | — | |
| GE Aerospace | 0.39 | 0.36 | — | — | — | |
| Honeywell International Inc. | 0.57 | 0.53 | — | — | — | |
| Lockheed Martin Corp. | 1.25 | 1.32 | — | — | — | |
| RTX Corp. | 0.42 | 0.40 | — | — | — | |
| Total Asset Turnover, Sector | ||||||
| Capital Goods | 0.54 | 0.50 | — | — | — | |
| Total Asset Turnover, Industry | ||||||
| Industrials | 0.66 | 0.58 | — | — | — | |
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
Total asset turnover = Net revenues ÷ Total assets
= 15,991,700 ÷ 18,081,600 = 0.88
2 Click competitor name to see calculations.
The total asset turnover for the period between 2018 and 2022 exhibits a cyclical pattern, characterized by a notable contraction in efficiency followed by a steady recovery. The ratio reached its lowest point in 2020 before returning to levels slightly exceeding the 2018 baseline by the end of the period.
- Net Revenue Trends
- Net revenues experienced volatility, increasing from US$ 15.67 billion in 2018 to a peak of US$ 16.60 billion in 2019. A significant decline occurred in 2020, with revenues dropping to US$ 12.45 billion. This was followed by a consistent upward trajectory, returning to US$ 15.99 billion by December 31, 2022.
- Total Asset Base Management
- The asset base expanded from US$ 17.91 billion in 2018 to a peak of US$ 20.49 billion in 2019. Subsequently, total assets decreased and stabilized, remaining relatively constant between US$ 18.06 billion and US$ 18.16 billion from 2020 through 2022. This indicates that while revenues fluctuated significantly, the asset base was managed with greater stability after 2019.
- Asset Turnover Ratio Dynamics
- The total asset turnover ratio declined from 0.87 in 2018 to a low of 0.69 in 2020, reflecting a period where revenue generation failed to keep pace with the invested asset base. A recovery trend is observed in the following two years, with the ratio rising to 0.78 in 2021 and 0.88 in 2022. This recovery suggests an improvement in operational efficiency, as the company generated higher revenues from a leaner asset base compared to 2019 levels.
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Equity Turnover
Trane Technologies plc, equity turnover 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) | ||||||
| Net revenues | 15,991,700) | 14,136,400) | 12,454,700) | 16,598,900) | 15,668,200) | |
| Total Trane Technologies plc shareholders’ equity | 6,088,600) | 6,255,900) | 6,407,700) | 7,267,600) | 7,022,700) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 2.63 | 2.26 | 1.94 | 2.28 | 2.23 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 3.57 | 2.92 | — | — | — | |
| Eaton Corp. plc | 1.22 | 1.20 | — | — | — | |
| GE Aerospace | 2.02 | 1.76 | — | — | — | |
| Honeywell International Inc. | 2.12 | 1.85 | — | — | — | |
| Lockheed Martin Corp. | 7.12 | 6.12 | — | — | — | |
| RTX Corp. | 0.92 | 0.88 | — | — | — | |
| Equity Turnover, Sector | ||||||
| Capital Goods | 2.54 | 2.28 | — | — | — | |
| Equity Turnover, Industry | ||||||
| Industrials | 3.06 | 2.63 | — | — | — | |
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
Equity turnover = Net revenues ÷ Total Trane Technologies plc shareholders’ equity
= 15,991,700 ÷ 6,088,600 = 2.63
2 Click competitor name to see calculations.
The analysis of investment activity from 2018 to 2022 reveals a period of revenue volatility coupled with a consistent reduction in the equity base, resulting in an overall increase in capital utilization efficiency.
- Net Revenue Performance
- Revenues experienced a moderate increase in 2019, followed by a significant contraction in 2020, when values fell to approximately 12.45 billion US dollars. A consistent recovery was observed in the subsequent two years, with 2022 revenues reaching 15.99 billion US dollars, effectively surpassing 2018 levels.
- Shareholders' Equity Trends
- Total shareholders' equity peaked in 2019 at 7.27 billion US dollars before entering a sustained downward trajectory. From 2020 through 2022, equity declined steadily, ending the period at 6.09 billion US dollars. This indicates a strategic reduction in the equity base over the observed five-year window.
- Equity Turnover Dynamics
- The equity turnover ratio fluctuated in alignment with revenue trends, dropping to a low of 1.94 in 2020. However, the ratio recovered sharply to 2.26 in 2021 and reached a peak of 2.63 in 2022. This upward trend in the latter years is driven by the simultaneous recovery of net revenues and the decrease in total shareholders' equity, signifying an improved efficiency in generating sales relative to the invested equity.
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