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GuruFocus has detected 2 Warning Signs with R.R.Donnelley & Sons Co \$RRD.
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R.R.Donnelley & Sons Co (NYSE:RRD)
Gross Profit
\$1,377 Mil (TTM As of Dec. 2016)

R.R.Donnelley & Sons Co's gross profit for the three months ended in Dec. 2016 was \$-405 Mil. R.R.Donnelley & Sons Co's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$1,377 Mil.

Gross Margin is calculated as gross profit divided by its revenue. R.R.Donnelley & Sons Co's gross profit for the three months ended in Dec. 2016 was \$-405 Mil. R.R.Donnelley & Sons Co's revenue for the three months ended in Dec. 2016 was \$-1,258 Mil. Therefore, R.R.Donnelley & Sons Co's Gross Margin for the quarter that ended in Dec. 2016 was 32.21%.

R.R.Donnelley & Sons Co had a gross margin of 32.21% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of R.R.Donnelley & Sons Co was 26.36%. The lowest was 19.97%. And the median was 23.27%.

Warning Sign:

R.R.Donnelley & Sons Co gross margin has been in long term decline. The average rate of decline per year is -2.8%.

Definition

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

R.R.Donnelley & Sons Co'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 = 6895.7 - 5518.9 = 1,377

R.R.Donnelley & Sons Co's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = -1257.8 - -852.7 = -405

R.R.Donnelley & Sons Co Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 569.3 (Mar. 2016 ) + 604.9 (Jun. 2016 ) + 607.7 (Sep. 2016 ) + -405.1 (Dec. 2016 ) = \$1,377 Mil.

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

R.R.Donnelley & Sons Co'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 = -405 / -1257.8 = 32.21 %

* 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

R.R.Donnelley & Sons Co had a gross margin of 32.21% 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.

R.R.Donnelley & Sons Co Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 3,055 3,005 2,395 2,376 2,519 2,333 2,331 2,551 2,464 1,377

R.R.Donnelley & Sons Co Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 648 668 580 616 620 649 569 605 608 -405
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