Small-cap Farming company S&W Seed Company is down -3.5% during this morning's trading session, while the S&P 500 moved 0.0%. With last year's reported gross margins at 8.9%, you might be wondering if today's drop is an opportunity to pick up shares of a profitable company at a discount.
Gross margins give insight into the basic economics of the company' product line and its pricing power in the target market, yet it's essential to balance this with a review of S&W Seed Company's operating margins. Operating margins take into account the company's fixed overhead costs, in addition to the cost of revenue used to calculate gross margins.
Is S&W Seed Company plagued with bloated overhead expenses that are eating away at an otherwise profitable business? Or is the company currently unprofitable because it is in a growth phase? A combined analysis of both gross and operating margins can help answer these questions, so that you understand what kind of business you are investing in.
| Date Reported | Revenue ($ k) | Cost of Revenue ($ k) | Gross Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-09-28 | 71,354 | -64,999 | 9 | -43.75 |
| 2021-09-28 | 84,049 | -70,372 | 16 | -15.79 |
| 2020-09-23 | 79,582 | -64,648 | 19 | -48.65 |
| 2019-10-28 | 109,723 | -69,014 | 37 | 60.87 |
| 2018-10-29 | 64,086 | -49,332 | 23 | 9.52 |
| 2017-09-20 | 75,374 | -59,233 | 21 |
S&W Seed Company'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 -0.0% compared to 0.0% for its revenues, its gross margins have been shrinking -0.2% on average each year.
| Date Reported | Total Revenue ($ k) | Operating Expenses ($ k) | Operating Margins (%) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-09-28 | 71,354 | -39,159 | -46 | -91.67 |
| 2021-09-28 | 84,049 | -33,946 | -24 | 0.0 |
| 2020-09-23 | 79,582 | -33,721 | -24 | -300.0 |
| 2019-10-28 | 109,723 | -27,887 | 12 | 340.0 |
| 2018-10-29 | 64,086 | -17,830 | -5 | -66.67 |
| 2017-09-20 | 75,374 | -18,152 | -3 |
The table above tells us that, on average, S&W Seed Company has not been profitable over the last four years, which should be a warning sign to prospective investors. Indeed, the company's operating margins are sinking at rate of -57.6%
