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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 Margin %
32.21% (As of Dec. 2016)

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%.

Warning Sign:

R.R.Donnelley & Sons Co gross margin has been in long term decline. The average rate of decline per year is -3.7%.

RRD' s Gross Margin % Range Over the Past 10 Years
Min: 19.97   Max: 26.36
Current: 19.97

19.97
26.36

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%.

RRD's Gross Margin % is ranked lower than
80% of the 616 Companies
in the Global Business Services industry.

( Industry Median: 41.12 vs. RRD: 19.97 )

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

The 5-Year average Growth Rate of Gross Margin for R.R.Donnelley & Sons Co was -3.70% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

R.R.Donnelley & Sons Co's Gross Margin for the fiscal year that ended in Dec. 2016 is calculated as

Gross Margin (A: Dec. 2016 )=Gross Profit (A: Dec. 2016 ) / Revenue (A: Dec. 2016 )
=1376.8 / 6895.7
=(Revenue - Cost of Goods Sold) / Revenue
=(6895.7 - 5518.9) / 6895.7
=19.97 %

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 )
=-405.1 / -1257.8
=(Revenue - Cost of Goods Sold) / Revenue
=(-1257.8 - -852.7) / -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


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


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

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross Margin 26.3625.9524.2923.7223.7422.8222.2420.5520.2519.97

R.R.Donnelley & Sons Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross Margin 21.8930.0521.1122.4121.9229.6321.4722.1621.9232.21
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