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GuruFocus has detected 3 Warning Signs with Radisys Corp \$RSYS.
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Gross Profit
\$56.1 Mil (TTM As of Dec. 2016)

Radisys Corp's gross profit for the three months ended in Dec. 2016 was \$13.6 Mil. Radisys Corp's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$56.1 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Radisys Corp's gross profit for the three months ended in Dec. 2016 was \$13.6 Mil. Radisys Corp's revenue for the three months ended in Dec. 2016 was \$40.6 Mil. Therefore, Radisys Corp's Gross Margin for the quarter that ended in Dec. 2016 was 33.56%.

Radisys Corp had a gross margin of 33.56% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Radisys Corp was 30.77%. The lowest was 22.09%. And the median was 27.61%.

Warning Sign:

Radisys Corp gross margin has been in long term decline. The average rate of decline per year is -2.2%.

Definition

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

Radisys Corp'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 = 212.392 - 156.304 = 56.1

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

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 40.561 - 26.948 = 13.6

Radisys Corp Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 12.784 (Mar. 2016 ) + 15.445 (Jun. 2016 ) + 14.246 (Sep. 2016 ) + 13.613 (Dec. 2016 ) = \$56.1 Mil.

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

Radisys Corp'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 = 13.6 / 40.561 = 33.56 %

* 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

Radisys Corp had a gross margin of 33.56% 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.