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Strategies & Market Trends : Value Investing
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To: Spekulatius who wrote (36933)3/11/2010 1:27:38 AM
From: Paul Senior  Read Replies (1) of 78747
 
CADC. To me, it's not their product that's innovative. It's that they have mobile plants. I'm no expert here. I don't recall any USA ready-mix companies that have these in use here though.

Gross margin for this quarter of course is $5.2M/$26M = 20%
Gross margin for the comparable quarter is $3.9/$10.8M = 36%
As reported: "Gross margin was 20.0% versus 36.5% in the same quarter last year". So gross margin % fell.

Continuing to fog the mind, they felt they had to report another percentage: That the gross profit did increase from $3.9M to $5.2 from the prior year quarter, or "Gross profit increased 32.3% year-over-year to $5.2 million."

Okay, about "net earnings margin". Net profit margin this quarter was $7.9M/$26M = 30% vs. $2.7M/$10.8M = 25%.

So we have this anomaly of net earnings margin this quarter of 30% exceeding this year's gross margin of 20%. That's because apparently it's required that $3.36M of "change in fair value of warrants" must be included now in moving from gross to net. And this is also the place to include $1.3M of "other subsidy income".

I'm one who tries to use net profit margins as a value criteria, and so I'm not going to be liking non-recurring items (I hope they are non-recurring) such as "change in fair value of warrants". They may invalidate conclusions I get when I compare a company's profit margin performance year by year. As seen here, these items can distort how how much sales dollars actually drop to the bottom line.
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