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GuruFocus has detected 3 Warning Signs with R.R.Donnelley & Sons Co $RRD.
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R.R.Donnelley & Sons Co (NYSE:RRD)
Gross Profit
$1,135 Mil (TTM As of Mar. 2017)

R.R.Donnelley & Sons Co's gross profit for the three months ended in Mar. 2017 was $328 Mil. R.R.Donnelley & Sons Co's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $1,135 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 Mar. 2017 was $328 Mil. R.R.Donnelley & Sons Co's revenue for the three months ended in Mar. 2017 was $1,676 Mil. Therefore, R.R.Donnelley & Sons Co's Gross Margin for the quarter that ended in Mar. 2017 was 19.55%.

R.R.Donnelley & Sons Co had a gross margin of 19.55% for the quarter that ended in Mar. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of R.R.Donnelley & Sons Co was 26.36%. The lowest was 19.18%. 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 -3.7%.


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 Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=1676.3 - 1348.5
=328

R.R.Donnelley & Sons Co Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 604.9 (Jun. 2016 ) + 607.7 (Sep. 2016 ) + -405.1 (Dec. 2016 ) + 327.8 (Mar. 2017 ) = $1,135 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 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
=328 / 1676.3
=19.55 %

* 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 19.55% for the quarter that ended in Mar. 2017 => No sustainable competitive advantage


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.

R.R.Donnelley & Sons Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 3,0553,0052,3952,3762,5192,3332,3311,4741,4051,377

R.R.Donnelley & Sons Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit -409580616620-410333605608-405328
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