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GuruFocus has detected 4 Warning Signs with AECOM $ACM.
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AECOM (NYSE:ACM)
Gross Profit
$672 Mil (TTM As of Dec. 2016)

AECOM's gross profit for the three months ended in Dec. 2016 was $170 Mil. AECOM's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $672 Mil.

Gross Margin is calculated as gross profit divided by its revenue. AECOM's gross profit for the three months ended in Dec. 2016 was $170 Mil. AECOM's revenue for the three months ended in Dec. 2016 was $4,358 Mil. Therefore, AECOM's Gross Margin for the quarter that ended in Dec. 2016 was 3.90%.

AECOM had a gross margin of 3.90% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of AECOM was 27.40%. The lowest was 2.97%. And the median was 5.52%.

Warning Sign:

AECOM gross margin has been in long term decline. The average rate of decline per year is -10.9%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

AECOM's Gross Profit for the fiscal year that ended in Sep. 2016 is calculated as

Gross Profit (A: Sep. 2016 )=Revenue - Cost of Goods Sold
=17410.825 - 16768.001
=643

AECOM's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

Gross Profit (Q: Dec. 2016 )=Revenue - Cost of Goods Sold
=4358.349 - 4188.376
=170

AECOM Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 183.444 (Mar. 2016 ) + 171.343 (Jun. 2016 ) + 147.179 (Sep. 2016 ) + 169.973 (Dec. 2016 ) = $672 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

AECOM's Gross Margin for the quarter that ended in Dec. 2016 is calculated as

Gross Margin (Q: Dec. 2016 )=Gross Profit (Q: Dec. 2016 ) / Revenue (Q: Dec. 2016 )
=(Revenue - Cost of Goods Sold) / Revenue
=170 / 4358.349
=3.90 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

AECOM had a gross margin of 3.90% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

AECOM Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
Gross_Profit 1,161287351430467422450403535643

AECOM Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 129135103127171141183171147170
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