Synopsys Inc. (NASDAQ:SNPS)

An examination of short-term operating activity ratios reveals fluctuating performance over the observed period. Inventory turnover generally increased from 2021 to late 2022, followed by a decline through 2025. Receivables turnover exhibited more volatility, with peaks in 2021 and mid-2023, but ultimately decreased towards the end of the period. Working capital turnover demonstrated significant fluctuations, peaking in late 2022 before experiencing a substantial decrease through 2025.

Inventory Turnover

Inventory turnover showed an upward trend from 3.51 in January 2021 to 5.02 in October 2022, indicating increasing efficiency in managing inventory. However, this trend reversed, with turnover decreasing to 4.45 by October 2025. The decline suggests a potential slowdown in sales relative to inventory levels, or an increase in inventory holdings.

Receivables Turnover

Receivables turnover was relatively high in 2021, peaking at 7.40 in October. It decreased in early 2022, then increased again, reaching 8.29 in July 2023. A subsequent decline was observed, falling to 4.69 by October 2025. This suggests variability in the speed at which receivables are collected, potentially influenced by changes in credit policies or customer payment behavior.

Working Capital Turnover

Working capital turnover experienced substantial swings. It decreased from 16.88 in January 2021 to 7.78 in April 2022, then surged to 21.34 in October 2022. A dramatic decrease followed, with turnover falling to 0.43 in April 2025, and a slight recovery to 3.08 by October 2025. This volatility indicates significant changes in the relationship between revenue and working capital, potentially reflecting shifts in operational strategies or financing practices.

Average Inventory Processing Period

The average inventory processing period generally decreased from 104 days in January 2021 to 73 days in October 2022, aligning with the increase in inventory turnover. However, it increased to 123 days in January 2025, mirroring the decline in inventory turnover. This indicates a lengthening time to convert inventory into sales in recent periods.

Average Receivable Collection Period

The average receivable collection period decreased from 75 days in January 2021 to a low of 44 days in July 2023, corresponding with higher receivables turnover. It then increased to 78 days by October 2025, suggesting a lengthening collection cycle. This could indicate difficulties in collecting payments or a change in credit terms.

Operating Cycle

The operating cycle decreased from 179 days in January 2021 to 129 days in July 2022, then increased to 160 days by October 2025. This overall trend suggests a lengthening of the time required to convert investments in inventory and other resources into cash, potentially impacting liquidity.

In summary, the observed trends suggest a period of improving efficiency in inventory and receivables management through late 2022, followed by a deterioration in these metrics. The significant decline in working capital turnover, coupled with the lengthening operating cycle, warrants further investigation to understand the underlying causes and potential implications for the business.

Inventory turnover exhibited a generally increasing trend from January 2021 through October 2022, followed by a period of fluctuation and a subsequent increase in the latter quarters of the observed period. The ratio demonstrates the efficiency with which inventories are sold and replaced over the analyzed timeframe.

Initial Trend (Jan 2021 – Oct 2022)

The inventory turnover ratio began at 3.51 in January 2021 and generally increased, reaching a peak of 5.02 in October 2022. This indicates a strengthening ability to convert inventory into sales during this period. The increases were not always consistent quarter-over-quarter, but the overall direction was positive.

Fluctuation and Subsequent Increase (Jan 2023 – Oct 2025)

Following the peak in October 2022, the ratio experienced a decline, reaching a low of 2.98 in January 2025. This suggests a potential slowdown in sales relative to inventory levels. However, the ratio rebounded in the final quarter of the observation period, reaching 4.45 in October 2025, indicating a renewed improvement in inventory management or sales velocity.

Notable Quarterly Changes

The largest single-quarter increase occurred between July 2022 (4.62) and October 2022 (5.02). Conversely, the most significant decrease was observed between October 2022 (5.02) and January 2023 (4.94). The substantial increase in inventory turnover in October 2025, from 3.52 in July 2025 to 4.45, warrants further investigation to understand the underlying drivers.

Long-Term Perspective

Despite the fluctuations, the inventory turnover ratio in the most recent quarter (October 2025) remains above the level observed in the initial quarters of the analyzed period (January 2021 – April 2021). This suggests that, overall, the company has improved its inventory management practices over the long term, although recent volatility requires monitoring.

The receivables turnover ratio exhibits fluctuations over the observed period, generally indicating changes in the efficiency with which the company converts its receivables into cash. An initial period of increasing efficiency is followed by periods of decline and subsequent stabilization, with a notable increase in the most recent quarters.

Initial Trend (2021)

From January 2021 through October 2021, the receivables turnover ratio demonstrates a consistent upward trend, increasing from 4.84 to 7.40. This suggests improving efficiency in collecting receivables during this timeframe, potentially due to more effective credit policies or faster payment cycles.

Decline and Stabilization (2022)

The ratio experienced a significant decline in January 2022, falling to 4.34, before recovering to 6.58 by April 2022. The subsequent quarters of 2022 show a more moderate fluctuation, ranging between 6.38 and 7.25. This period suggests a potential disruption in collection efficiency followed by a partial recovery and relative stabilization.

Fluctuations and Recent Increase (2023-2025)

The ratio continued to fluctuate in 2023, beginning at 5.00 in January and peaking at 8.29 in July, before decreasing to 6.17 in October. This pattern continued into 2024, with a range between 5.63 and 7.56. However, the most recent quarters show a marked increase, rising from 4.62 in January 2025 to 4.69 in July 2025 and further to 4.69 in October 2025. This recent increase could indicate improved collection efforts or a change in customer payment behavior.

Overall Observations

The receivables turnover ratio does not demonstrate a consistently strong trend. While periods of improvement are evident, they are interspersed with declines and stabilization. The recent increase in the ratio warrants further investigation to determine its sustainability and underlying causes. The ratio's fluctuations correlate with changes in both revenue and accounts receivable, suggesting a dynamic relationship between sales and collection processes.

The working capital turnover ratio exhibits considerable fluctuation over the observed period. Initially, the ratio demonstrates a decline from 16.88 in January 2021 to 9.18 in April 2021, followed by a period of relative stability, oscillating between approximately 9.18 and 14.02 through October 2022. A significant increase is then noted, peaking at 21.34 in October 2022 before decreasing to 17.05 in January 2023.

Recent Performance (2023-2025)

From January 2023 through October 2023, the ratio generally decreased, reaching a low of 7.85 in January 2024. A substantial, but temporary, increase occurred in April 2024, reaching 2.82, followed by further declines to 1.60 in October 2024. The ratio continued to fall sharply in the first half of 2025, reaching a minimum of 0.43 in April 2025. A subsequent increase to 3.08 in July 2025 was observed, followed by a slight increase to 3.08 in October 2025.

The substantial volatility in the working capital turnover ratio, particularly in the latter portion of the period, warrants further investigation. The dramatic decrease in the ratio from October 2023 through April 2025 suggests a significant increase in working capital relative to revenue. This could be attributable to several factors, including increased inventory levels, slower collection of receivables, or a deliberate build-up of cash reserves. The recent partial recovery in July and October 2025 may indicate a stabilization or reversal of these trends, but continued monitoring is necessary.

Long-Term Trends

Prior to 2023, the ratio demonstrated a more moderate range of fluctuation. The period from January 2021 to October 2022 suggests a relatively consistent ability to generate revenue from its working capital. However, the pronounced shifts observed from January 2023 onwards represent a departure from this earlier pattern.

The observed changes in working capital turnover should be considered in conjunction with other financial metrics and operational factors to gain a comprehensive understanding of the company’s financial performance and efficiency.

The average inventory processing period exhibited a generally decreasing trend from January 31, 2021, through October 31, 2022, followed by increased volatility and a subsequent upward trend. A detailed examination reveals fluctuations and potential shifts in inventory management efficiency.

Overall Trend

Beginning at 104 days in January 2021, the average inventory processing period generally declined, reaching a low of 73 days by October 2022. This suggests improving efficiency in converting inventory into sales during this period. However, from January 2023 onwards, the period began to increase, demonstrating a reversal of the prior trend. The period peaked at 123 days in January 2025 before decreasing to 104 days in April 2025 and then further decreasing to 82 days in July 2025.

Initial Decline (2021-2022)

The period decreased consistently from 104 days in January 2021 to 100 days in April 2021, 103 days in July 2021, 97 days in October 2021, 85 days in January 2022, 82 days in April 2022, 79 days in July 2022, and finally reaching 73 days in October 2022. This indicates a sustained improvement in inventory turnover and a reduction in the time inventory is held before being sold.

Increased Volatility and Subsequent Increase (2023-2025)

From January 2023, the average inventory processing period began to fluctuate more significantly. It increased to 74 days in January 2023, 82 days in April 2023, 88 days in July 2023, and 97 days in October 2023. This was followed by a substantial increase to 115 days in January 2024, 113 days in April 2024, and 117 days in July 2024. A slight decrease to 106 days was observed in October 2024, before increasing again to 123 days in January 2025. The period then decreased to 115 days in April 2025 and 104 days in July 2025. This period of volatility and overall increase suggests potential challenges in maintaining the prior efficiency levels, possibly due to changes in demand, supply chain disruptions, or inventory management strategies.

The recent fluctuations warrant further investigation to determine the underlying causes and assess the potential impact on operational efficiency and financial performance. The return to a period closer to the levels observed in the earlier part of 2023 and 2024 in July 2025 may indicate a stabilization or corrective action being taken.

The average receivable collection period exhibited fluctuations over the observed timeframe. Initially, a decreasing trend was apparent, followed by periods of increase and relative stability. A detailed examination reveals specific patterns and potential areas of interest.

Overall Trend

The average collection period began at 75 days in January 2021 and generally decreased through October 2021, reaching a low of 49 days. A significant increase occurred in January 2022, rising to 84 days. Subsequent periods saw fluctuations, with a general trend towards stabilization in the 50-60 day range through October 2023. More recently, from January 2024 through October 2025, the period has increased, ending at 78 days.

Short-Term Fluctuations (2021-2022)

The period decreased consistently from January 2021 to October 2021, indicating improved efficiency in collecting receivables. The sharp increase to 84 days in January 2022 represents a notable deviation from this trend. This could be attributable to a variety of factors, such as changes in credit terms offered to customers, a shift in the customer mix, or isolated collection issues. The subsequent quarters in 2022 demonstrated a recovery, but did not return to the levels seen in late 2021.

Mid-Term Stability (2022-2023)

From April 2022 through October 2023, the average collection period remained relatively stable, fluctuating between 44 and 65 days. This suggests a period of consistent collection practices. The lowest point during this period was 44 days in July 2023, indicating a particularly efficient collection cycle.

Recent Increases (2024-2025)

The period has shown an increasing trend from January 2024, rising from 65 days to 78 days by October 2025. This recent increase warrants further investigation to determine the underlying causes. Potential factors include a loosening of credit policies, slower payment behavior from customers, or an increase in the proportion of larger, longer-payment-term invoices.

In summary, the average receivable collection period has demonstrated a dynamic pattern over the analyzed period. While periods of efficient collection were observed, recent increases suggest a potential need for review of credit and collection policies.

The operating cycle exhibited fluctuations over the analyzed period, spanning from January 31, 2021, to October 31, 2025. Initial values indicated a cycle of 179 days, followed by a generally decreasing trend through the first half of 2022, before experiencing renewed variability. A detailed examination of the components contributing to the operating cycle reveals insights into the company’s efficiency in managing inventory and collecting receivables.

Average Inventory Processing Period

The average inventory processing period demonstrated a decreasing trend from 104 days in January 2021 to a low of 73 days in October 2022. However, this was followed by an increase, peaking at 123 days in January 2025, before decreasing again to 82 days in October 2025. This suggests potential shifts in inventory management strategies or external factors impacting inventory turnover. The most recent increase warrants further investigation to determine its sustainability and potential impact on working capital.

Average Receivable Collection Period

The average receivable collection period showed considerable volatility. It decreased significantly from 75 days in January 2021 to 44 days in July 2023, indicating improved efficiency in collecting payments. However, the period subsequently increased to 78 days in October 2025. This suggests potential changes in credit policies, customer payment behavior, or the composition of the customer base. The recent increase could indicate a need to reassess collection efforts.

Operating Cycle

The operating cycle initially decreased from 179 days to a minimum of 129 days in July 2022, reflecting improvements in both inventory management and receivable collection. Following this, the cycle increased, reaching 183 days in July 2025, before decreasing to 160 days in October 2025. This overall pattern mirrors the combined trends of its component parts. The recent fluctuations suggest a potential weakening in the company’s ability to efficiently convert investments in inventory and other resources into cash. The cycle’s length in the latter part of the period is notably higher than its initial values, potentially indicating a need for operational improvements.

In summary, while initial periods demonstrated improvements in operating cycle efficiency, more recent quarters show a trend towards increased cycle length. This is driven by fluctuations in both inventory processing and receivable collection periods. Continued monitoring of these ratios is recommended to identify the underlying causes of these changes and to assess their impact on the company’s liquidity and overall financial health.