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GuruFocus has detected 5 Warning Signs with Kratos Defense & Security Solutions Inc $KTOS.
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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Gross Profit
$162.8 Mil (TTM As of Mar. 2017)

Kratos Defense & Security Solutions Inc's gross profit for the three months ended in Mar. 2017 was $45.1 Mil. Kratos Defense & Security Solutions Inc's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $162.8 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Kratos Defense & Security Solutions Inc's gross profit for the three months ended in Mar. 2017 was $45.1 Mil. Kratos Defense & Security Solutions Inc's revenue for the three months ended in Mar. 2017 was $167.8 Mil. Therefore, Kratos Defense & Security Solutions Inc's Gross Margin for the quarter that ended in Mar. 2017 was 26.88%.

Kratos Defense & Security Solutions Inc had a gross margin of 26.88% for the quarter that ended in Mar. 2017 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Kratos Defense & Security Solutions Inc was 26.78%. The lowest was 16.32%. And the median was 23.24%.

Warning Sign:

Kratos Defense & Security Solutions Inc gross margin has been in long term decline. The average rate of decline per year is -2.9%.


Definition

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

Kratos Defense & Security Solutions Inc'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
=668.7 - 515.1
=153.6

Kratos Defense & Security Solutions Inc's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=167.8 - 122.7
=45.1

Kratos Defense & Security Solutions Inc Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 45.2 (Jun. 2016 ) + 25.9 (Sep. 2016 ) + 46.6 (Dec. 2016 ) + 45.1 (Mar. 2017 ) = $162.8 Mil.

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

Kratos Defense & Security Solutions Inc's Gross Margin for the quarter that ended in Mar. 2017 is calculated as

Gross Margin (Q: Mar. 2017 )=Gross Profit (Q: Mar. 2017 ) / Revenue (Q: Mar. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=45.1 / 167.8
=26.88 %

* 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

Kratos Defense & Security Solutions Inc had a gross margin of 26.88% for the quarter that ended in Mar. 2017 => 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.

Kratos Defense & Security Solutions Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 31.658.263.684.3191.2257.2204.5179.4161.8153.6

Kratos Defense & Security Solutions Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit 45.138.340.940.442.235.945.225.946.645.1
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