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GuruFocus has detected 3 Warning Signs with ARRIS International PLC \$ARRS.
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ARRIS International PLC (NAS:ARRS)
Gross Profit
\$1,708 Mil (TTM As of Dec. 2016)

ARRIS International PLC's gross profit for the three months ended in Dec. 2016 was \$436 Mil. ARRIS International PLC's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$1,708 Mil.

Gross Margin is calculated as gross profit divided by its revenue. ARRIS International PLC's gross profit for the three months ended in Dec. 2016 was \$436 Mil. ARRIS International PLC's revenue for the three months ended in Dec. 2016 was \$1,759 Mil. Therefore, ARRIS International PLC's Gross Margin for the quarter that ended in Dec. 2016 was 24.78%.

ARRIS International PLC had a gross margin of 24.78% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of ARRIS International PLC was 41.77%. The lowest was 25.00%. And the median was 31.95%.

Warning Sign:

ARRIS International PLC gross margin has been in long term decline. The average rate of decline per year is -6.7%.

Definition

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

ARRIS International PLC's Gross Profit for the fiscal year that ended in Dec. 2016 is calculated as

 Gross Profit (A: Dec. 2016 ) = Revenue - Cost of Goods Sold = 6829.118 - 5121.501 = 1,708

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

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 1759.223 - 1323.223 = 436

ARRIS International PLC Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 384.032 (Mar. 2016 ) + 444.734 (Jun. 2016 ) + 442.85 (Sep. 2016 ) + 436 (Dec. 2016 ) = \$1,708 Mil.

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

ARRIS International PLC'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 = 436 / 1759.223 = 24.78 %

* 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

ARRIS International PLC had a gross margin of 24.78% for the quarter that ended in Dec. 2016 => Competition eroding margins

Related Terms

Historical Data

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

ARRIS International PLC Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 274 393 463 424 411 463 1,023 1,582 1,419 1,708

ARRIS International PLC Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 436 381 337 364 359 359 384 445 443 436
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