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GuruFocus has detected 9 Warning Signs with HRG Group Inc $HRG.
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HRG Group Inc (NYSE:HRG)
Gross Profit
$2,085 Mil (TTM As of Dec. 2016)

HRG Group Inc's gross profit for the three months ended in Dec. 2016 was $428 Mil. HRG Group Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $2,085 Mil.

Gross Margin is calculated as gross profit divided by its revenue. HRG Group Inc's gross profit for the three months ended in Dec. 2016 was $428 Mil. HRG Group Inc's revenue for the three months ended in Dec. 2016 was $1,190 Mil. Therefore, HRG Group Inc's Gross Margin for the quarter that ended in Dec. 2016 was 35.96%.

HRG Group Inc had a gross margin of 35.96% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of HRG Group Inc was 52.31%. The lowest was 35.22%. And the median was 40.50%.

Warning Sign:

HRG Group Inc gross margin has been in long term decline. The average rate of decline per year is -4.3%.


Definition

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

HRG Group Inc'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
=5215.4 - 3119.8
=2,096

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

Gross Profit (Q: Dec. 2016 )=Revenue - Cost of Goods Sold
=1189.6 - 761.8
=428

HRG Group Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 513.5 (Mar. 2016 ) + 607.1 (Jun. 2016 ) + 536.7 (Sep. 2016 ) + 427.8 (Dec. 2016 ) = $2,085 Mil.

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

HRG Group Inc'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
=428 / 1189.6
=35.96 %

* 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

HRG Group Inc had a gross margin of 35.96% for the quarter that ended in Dec. 2016 => Competition eroding margins


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.

HRG Group Inc Annual Data

Dec07Dec08Dec09Dec10Sep11Sep12Sep13Sep14Sep15Sep16
Gross_Profit 00001,4202,3442,8041,7591,6592,096

HRG Group Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit -544409414414421431514607537428
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