Does small-cap Toy company Funko 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 32.8%, you might be telling yourself the Funko 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 Funko'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 (%) |
|---|---|---|---|---|
| 2023-03-01 | 1,322,706 | -888,685 | 32.81 | -11.35 |
| 2022-03-03 | 1,029,293 | -648,302 | 37.01 | -3.06 |
| 2021-03-11 | 652,537 | -403,392 | 38.18 | 7.46 |
| 2020-03-05 | 795,122 | -512,580 | 35.53 | n/a |
Funko'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 -14.7% compared to 13.6% for its revenues, its gross margins have been shrinking -2.0% on average each year.
| Date Reported | Total Revenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2023-03-01 | 1,322,706 | -445,941 | -0.9 | -109.71 |
| 2022-03-03 | 1,029,293 | -285,526 | 9.27 | 156.79 |
| 2021-03-11 | 652,537 | -225,602 | 3.61 | -38.4 |
| 2020-03-05 | 795,122 | -235,929 | 5.86 | n/a |
Over the last four years, Funko's operating margins have averaged 4.5% and are growing at a rate of -41.5%. 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 endurring trend.
