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GuruFocus has detected 1 Warning Sign with Richardson Electronics Ltd $RELL.
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Richardson Electronics Ltd (NAS:RELL)
Gross Profit
$45.3 Mil (TTM As of Feb. 2017)

Richardson Electronics Ltd's gross profit for the three months ended in Feb. 2017 was $10.7 Mil. Richardson Electronics Ltd's gross profit for the trailing twelve months (TTM) ended in Feb. 2017 was $45.3 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Richardson Electronics Ltd's gross profit for the three months ended in Feb. 2017 was $10.7 Mil. Richardson Electronics Ltd's revenue for the three months ended in Feb. 2017 was $32.3 Mil. Therefore, Richardson Electronics Ltd's Gross Margin for the quarter that ended in Feb. 2017 was 33.09%.

Richardson Electronics Ltd had a gross margin of 33.09% for the quarter that ended in Feb. 2017 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Richardson Electronics Ltd was 32.56%. The lowest was 22.09%. And the median was 29.55%.


Definition

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

Richardson Electronics Ltd's Gross Profit for the fiscal year that ended in May. 2016 is calculated as

Gross Profit (A: May. 2016 )=Revenue - Cost of Goods Sold
=142.016 - 97.181
=44.8

Richardson Electronics Ltd's Gross Profit for the quarter that ended in Feb. 2017 is calculated as

Gross Profit (Q: Feb. 2017 )=Revenue - Cost of Goods Sold
=32.313 - 21.621
=10.7

Richardson Electronics Ltd Gross Profit for the trailing twelve months (TTM) ended in Feb. 2017 was 13.388 (May. 2016 ) + 10.24 (Aug. 2016 ) + 10.964 (Nov. 2016 ) + 10.692 (Feb. 2017 ) = $45.3 Mil.

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

Richardson Electronics Ltd's Gross Margin for the quarter that ended in Feb. 2017 is calculated as

Gross Margin (Q: Feb. 2017 )=Gross Profit (Q: Feb. 2017 ) / Revenue (Q: Feb. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=10.7 / 32.313
=33.09 %

* 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

Richardson Electronics Ltd had a gross margin of 33.09% for the quarter that ended in Feb. 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.

Richardson Electronics Ltd Annual Data

May07May08May09May10May11May12May13May14May15May16
Gross_Profit 132.4135.6109.641.346.146.841.541.041.144.8

Richardson Electronics Ltd Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
Gross_Profit 10.59.810.211.310.49.813.410.211.010.7
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