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GuruFocus has detected 2 Warning Signs with H&R Block Inc \$HRB.
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H&R Block Inc (NYSE:HRB)
Gross Profit
\$1,327 Mil (TTM As of Jan. 2017)

H&R Block Inc's gross profit for the three months ended in Jan. 2017 was \$63 Mil. H&R Block Inc's gross profit for the trailing twelve months (TTM) ended in Jan. 2017 was \$1,327 Mil.

Gross Margin is calculated as gross profit divided by its revenue. H&R Block Inc's gross profit for the three months ended in Jan. 2017 was \$63 Mil. H&R Block Inc's revenue for the three months ended in Jan. 2017 was \$452 Mil. Therefore, H&R Block Inc's Gross Margin for the quarter that ended in Jan. 2017 was 13.96%.

H&R Block Inc had a gross margin of 13.96% for the quarter that ended in Jan. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of H&R Block Inc was 48.01%. The lowest was 36.30%. And the median was 40.43%.

Definition

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

H&R Block Inc's Gross Profit for the fiscal year that ended in Apr. 2016 is calculated as

 Gross Profit (A: Apr. 2016 ) = Revenue - Cost of Goods Sold = 3038.153 - 1685.552 = 1,353

H&R Block Inc's Gross Profit for the quarter that ended in Jan. 2017 is calculated as

 Gross Profit (Q: Jan. 2017 ) = Revenue - Cost of Goods Sold = 451.882 - 388.777 = 63

H&R Block Inc Gross Profit for the trailing twelve months (TTM) ended in Jan. 2017 was 1444.347 (Apr. 2016 ) + -85.901 (Jul. 2016 ) + -94.37 (Oct. 2016 ) + 63.105 (Jan. 2017 ) = \$1,327 Mil.

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

H&R Block Inc's Gross Margin for the quarter that ended in Jan. 2017 is calculated as

 Gross Margin (Q: Jan. 2017 ) = Gross Profit (Q: Jan. 2017 ) / Revenue (Q: Jan. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 63 / 451.882 = 13.96 %

* 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

H&R Block Inc had a gross margin of 13.96% for the quarter that ended in Jan. 2017 => No sustainable competitive advantage

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.

H&R Block Inc Annual Data

 Apr07 Apr08 Apr09 Apr10 Apr11 Apr12 Apr13 Apr14 Apr15 Apr16 Gross_Profit 1,513 1,498 1,487 1,406 1,168 1,192 1,375 1,452 1,448 1,353

H&R Block Inc Quarterly Data

 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Gross_Profit -87 114 1,485 -76 -98 82 1,444 -86 -94 63
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