Analysis of Short-term (Operating) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
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- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
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Short-term Activity Ratios (Summary)
CoStar Group Inc., short-term (operating) 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).
- Receivables Turnover
- The receivables turnover ratio demonstrated an overall increasing trend from 13.36 in 2018 to a peak of 15.96 in 2020, followed by a slight decline to 14.18 in 2022. This pattern indicates an initial improvement in the company's efficiency in collecting receivables, reaching maximum efficiency around 2020, after which the collection efficiency slightly decreased but remained above the 2018 level.
- Payables Turnover
- The payables turnover ratio exhibited a significant declining trend throughout the period, dropping sharply from 42.66 in 2018 to 14.55 in 2022. This decrease suggests that the company has been taking progressively longer to pay its suppliers, reflecting a lengthening of the payment cycle.
- Working Capital Turnover
- The working capital turnover ratio showed a notable decrease beginning at 1.13 in 2018, increasing momentarily to 1.41 in 2019 but then plummeting to a low range between 0.45 and 0.53 from 2020 onwards. This decline reflects a reduction in the company's efficiency in generating sales from its working capital, indicating a less optimal use of short-term assets and liabilities in recent years.
- Average Receivable Collection Period
- The average receivable collection period remained relatively stable, hovering around 23 to 27 days over the five-year span. It improved slightly from 27 days in 2018 to 23 days in 2020 and 2021, then increased marginally to 26 days in 2022. This stability suggests that despite fluctuations in receivables turnover, the actual time to collect receivables stayed mostly consistent.
- Average Payables Payment Period
- The average payables payment period increased consistently from 9 days in 2018 to 25 days in 2022. This indicates that the company extended the time taken to settle its obligations with suppliers, which aligns with the observed decrease in the payables turnover ratio.
Turnover Ratios
Average No. Days
Receivables Turnover
CoStar Group Inc., receivables turnover calculation, comparison to benchmarks
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
Receivables turnover = Revenues ÷ Accounts receivable, net
= ÷ =
- Revenue Trends
- The revenues demonstrated a consistent upward trend over the five-year period. Beginning at approximately $1.19 billion in 2018, revenues increased each year, reaching roughly $2.18 billion by 2022. This represents a significant growth rate, indicating expanding business operations and possibly increasing market demand or successful product offerings.
- Accounts Receivable, Net
- The net accounts receivable also showed steady growth, increasing from about $89.2 million in 2018 to nearly $154.0 million in 2022. This trend is consistent with the rising revenue figures, suggesting higher sales volumes and potentially extended credit terms or slower collections. The increase in accounts receivable aligns with the business expansion observed in revenues.
- Receivables Turnover Ratio
- The receivables turnover ratio increased from 13.36 in 2018 to a peak of 15.96 in 2020, indicating improved efficiency in collecting receivables relative to sales during that time. However, after 2020, there was a decline in the ratio to 14.18 by 2022. This decrease implies that the company has become somewhat less efficient in converting receivables into cash in the most recent years, despite higher revenues and receivables. This could be due to more lenient credit policies, slower customer payments, or other operational factors affecting collections.
- Overall Financial Dynamics
- Overall, the data reflects robust business growth as evidenced by increasing revenues and corresponding rises in accounts receivable. Nonetheless, the slight decline in receivables turnover ratio in the last two years signals potential challenges in receivables management or changes in customer payment behavior. Maintaining or improving collections efficiency should be a focus to support continued financial health amid growing sales figures.
Payables Turnover
CoStar Group Inc., payables turnover calculation, comparison to benchmarks
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
Payables turnover = Cost of revenues ÷ Accounts payable
= ÷ =
- Cost of Revenues
- The cost of revenues exhibits a consistent increasing trend over the five-year period. Beginning at approximately $269.9 million in 2018, it rose steadily each year to reach about $414.0 million in 2022. This represents a significant growth, highlighting an increasing scale of operations or rising costs associated with the company's revenue generation.
- Accounts Payable
- Accounts payable values also show a marked upward trajectory, starting from approximately $6.3 million in 2018 and increasing every year to approximately $28.5 million in 2022. The increase in accounts payable suggests either an expansion in credit purchases or extended payment terms with suppliers over time.
- Payables Turnover Ratio
- The payables turnover ratio demonstrates a clear declining trend during the period. From a high of 42.66 in 2018, it decreases each year to 14.55 in 2022. This decline indicates a slowing in the frequency with which the company settles its payables, potentially reflecting longer payment cycles or changes in the management of supplier relationships and working capital. Such a reduction in turnover ratio may suggest increased leverage of supplier credit or operational adjustments affecting cash flow dynamics.
Working Capital Turnover
CoStar Group Inc., working capital turnover calculation, comparison to benchmarks
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
Working capital turnover = Revenues ÷ Working capital
= ÷ =
- Working Capital Trends
- The working capital has demonstrated a significant upward trend from 2018 to 2022. Starting at approximately 1.06 billion US dollars in 2018, it decreased slightly in 2019 but then increased dramatically in 2020, reaching around 3.56 billion. This growth continued steadily through 2021 and 2022, peaking at approximately 4.81 billion US dollars by the end of 2022. This trend indicates a strengthening liquidity position and increased capacity to cover short-term liabilities.
- Revenue Trends
- Revenues have shown consistent growth over the analyzed period. Beginning at about 1.19 billion US dollars in 2018, revenues increased steadily each year, reaching nearly 2.18 billion US dollars in 2022. The year-on-year increase suggests a positive and sustained growth trajectory in the company's sales or service income.
- Working Capital Turnover Ratio Analysis
- The working capital turnover ratio displays a contrasting pattern compared to the absolute values of working capital and revenues. Initially, the ratio increased from 1.13 in 2018 to 1.41 in 2019, indicating more efficient use of working capital in generating revenues. However, from 2019 onwards, the ratio declined significantly, dropping to 0.47 in 2020, and stabilizing at lower values around 0.45 to 0.53 through 2022. This decline suggests that the growth rate of working capital has outpaced revenue growth, implying decreased operational efficiency in using working capital to generate sales.
- Overall Insights
- While the company has exhibited robust revenue growth and an increasing working capital base, the declining working capital turnover ratio raises concerns about the efficiency with which current assets are being utilized. The strong liquidity position could imply a strategic accumulation of working capital or potential underutilization of resources. It would be beneficial to further analyze the composition of working capital and underlying factors contributing to its growth for a comprehensive understanding of operational efficiency.
Average Receivable Collection Period
CoStar Group Inc., average receivable collection period calculation, comparison to benchmarks
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
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =
- Receivables Turnover
- The receivables turnover ratio exhibited an upward trend from 13.36 in 2018 to a peak of 15.96 in 2020, indicating improved efficiency in collecting receivables during this period. Subsequently, the ratio slightly declined to 15.58 in 2021 and further to 14.18 in 2022, suggesting a moderate reduction in collection efficiency towards the end of the period analyzed.
- Average Receivable Collection Period
- The average collection period decreased from 27 days in 2018 to 23 days in 2020 and 2021, reflecting a significant improvement in the speed of collecting outstanding receivables. However, there was a reversal in 2022, with the period increasing to 26 days, indicating a slight slowdown in collection speed compared to the prior two years.
- Overall Analysis
- The data show a pattern of strengthening receivables management efficiency from 2018 through 2020, continued stability in 2021, and a subsequent modest decline in 2022. The trends in the receivables turnover ratio and the average collection period are consistent and mirror each other, emphasizing the correlation between higher turnover rates and shorter collection periods. The slight decrease in efficiency during 2022 could warrant further investigation to identify underlying causes and address potential cash flow implications.
Average Payables Payment Period
CoStar Group Inc., average payables payment period calculation, comparison to benchmarks
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
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ =
- Payables Turnover
- The payables turnover ratio demonstrates a consistent and notable decline over the observed five-year period. Starting at 42.66 in December 2018, the ratio decreases to 14.55 by December 2022. This downward trend indicates that the company is taking longer to pay its suppliers, which may suggest a shift in payment strategy or changes in cash management practices.
- Average Payables Payment Period
- The average payables payment period shows a clear increasing trend from 9 days in December 2018 to 25 days in December 2022. The increase in the number of days aligns inversely with the decreasing payables turnover ratio and confirms that the company’s payment cycle has lengthened over time. This trend further illustrates the company’s extended duration for settling its trade payables, which could be part of cost management measures or working capital optimization.
- Overall Analysis
- The combined analysis of these two metrics reveals a trend toward longer payment cycles for liabilities. The steady decline of the payables turnover ratio alongside the increasing average payment period may have an impact on supplier relationships and cash flow. It suggests that the company is possibly leveraging extended payment terms to improve short-term liquidity or manage cash resources more efficiently. However, attention should be given to potential risks related to supplier credit terms and operational dependencies.