Does Diversey Generate Enough Profit?

Does mid-cap Specialty Chemicals company Diversey have a sustainably profitable business model? By studying its gross margins and comparing them to its operating margins, we can gain insight into quality of its business. With gross margins at 31.7%, you might be telling yourself the Diversey is profitable -- but there is more to the story.

Gross margins take into account only the cost of revenue, meaning the expenses directly related to each sale. So it's important to also look at operating margins, which take into account overhead costs. One way to look at it is that gross profit gives insight into Diversey's market and the viability of its business model. Operating margins, on the other hand, show you how efficiently the company is implementing this business model.

Date Reported Revenue ($ k) Cost of Revenue ($ k) Gross Margins (%) YoY Growth (%)
2022-12-31 2,765,900 1,890,100 31.66 -18.36
2021-12-31 2,618,900 1,603,400 38.78 -4.69
2020-12-31 2,629,200 1,559,400 40.69 -3.1
2019-12-31 2,623,900 1,522,100 41.99 n/a

Diversey's gross margins are currently in the green, but this might not be the case for long. Since its cost of revenue is growing at a rate of 5.8% compared to 1.4% for its revenues, its gross margins have been shrinking -6.5% on average each year.

Date Reported TotalRevenue ($ k) Operating Expenses ($ k) Operating Margins (%) YoY Growth (%)
2022-12-31 2,765,900 887,800 -0.43 -115.87
2021-12-31 2,618,900 944,400 2.71 -44.47
2020-12-31 2,629,200 941,400 4.88 -9.8
2019-12-31 2,623,900 959,800 5.41 n/a

Over the last four years, Diversey's operating margins have averaged 3.1% and are growing at a rate of -42.5%. Despite the unprofitable results in the most recent year, there is no present indication that the company's lack of profitability is part of an enduring trend.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.