A gross margin of 50% is not that impressive.
Also, a "gross margin" number is not very insightful without additional information.
Also, a "gross margin" number is not very insightful without additional information.
Securis keeping 51% of the money generated by its business, after you figure in what that service first cost the company, is indeed impressive.
What is also impressive though is if, as Securis' CEO suggests near the end of this[3] article, after all that their net income is only 1.4%. Is he really saying, there, that direct operating costs eat 99% of their gross margins, or is he not telling the FCC that a big chunk of change is being "spent" as operational costs on M&A and other re-directional consumables? My expertise is quickly exhausted in the subject, but... it can't all be going to kickbacks to the prisons.
1: http://www.investopedia.com/ask/answers/101314/what-are-diff...
2: http://www.investopedia.com/terms/g/grossprofit.asp
3: http://www.prisonpolicy.org/blog/2015/06/19/securus-profits/
IBM's 2014 revenue was $93Bn. IBM's 2014 costs was $46Bn. Therefore their gross profit was $46Bn (after rounding). This results in a gross margin of 46/93 = 51%.
If I looked through the NYSE I'd find no shortage of companies with a gross margin around 50%.
A gross margin figure of 50% alone is really nothing to be mind-blown about.
(To be clear, I'm most certainly not defending this company. Just saying that it would be wrong to be horrified with a 50% gross margin.)
To be fair, the legal system also removes consumers from the pool, so it's not a matter of "newness" but just that the system maintains some basic population.
And even if it was maintaining some basic population, the incentives become misaligned when you start introducing a for-profit prison industry.
So would I!
My only point is that, in general, a gross margin of 50% is not that impressive for a company. It's pretty common.
The article described it as a "a whopping 51 percent" but I would've described it as "a pretty boring 51 percent."
Of course, that doesn't mean that I'm for their business model. I'm totally against it.
This results in a gross margin of 46/93 = 51%.
If I looked through the NYSE I'd find no shortage of companies with a gross margin around 50%.
A gross margin figure of 50% alone is really nothing to be mind-blown about.
(To be clear, I'm most certainly not defending this company. Just saying that it would be wrong to be horrified with a 50% gross margin.)