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IRIDEX Corp  (NAS:IRIX) Gross Margin %: 40.25% (As of Sep. 2017)

Gross Margin % is calculated as gross profit divided by its revenue. IRIDEX Corp's Gross Profit for the three months ended in Sep. 2017 was $4.37 Mil. IRIDEX Corp's Revenue for the three months ended in Sep. 2017 was $10.87 Mil. Therefore, IRIDEX Corp's Gross Margin % for the quarter that ended in Sep. 2017 was 40.25%.

Warning Sign:

IRIDEX Corp gross margin has been in long term decline. The average rate of decline per year is -1.2%.


NAS:IRIX' s Gross Margin % Range Over the Past 10 Years
Min: 40.55   Max: 50.15
Current: 43.06

40.55
50.15

During the past 13 years, the highest Gross Margin % of IRIDEX Corp was 50.15%. The lowest was 40.55%. And the median was 48.42%.

NAS:IRIX's Gross Margin % is ranked lower than
64% of the 301 Companies
in the Global industry.

( Industry Median: 51.71 vs. NAS:IRIX: 43.06 )

IRIDEX Corp had a gross margin of 40.25% for the quarter that ended in Sep. 2017 => Durable competitive advantage

The 5-Year average Growth Rate of Gross Margin for IRIDEX Corp was -1.20% per year.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

IRIDEX Corp Annual Data

Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16
Gross Margin % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 48.28 48.56 50.00 47.78 45.15

IRIDEX Corp Quarterly Data

Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17
Gross Margin % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 43.37 44.40 42.59 44.94 40.25

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

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

IRIDEX Corp'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 )
=20.8 / 46.158
=(Revenue - Cost of Goods Sold) / Revenue
=(46.158 - 25.319) / 46.158
=45.15 %

IRIDEX Corp's Gross Margin for the quarter that ended in Sep. 2017 is calculated as


Gross Margin % (Q: Sep. 2017 )=Gross Profit (Q: Sep. 2017 ) / Revenue (Q: Sep. 2017 )
=-6.5 / 10.865
=(Revenue - Cost of Goods Sold) / Revenue
=(10.865 - 6.492) / 10.865
=40.25 %

* 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

IRIDEX Corp had a gross margin of 40.25% for the quarter that ended in Sep. 2017 => Durable competitive advantage


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.


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