REH moat, page-20

Since 2001, twice a year I have opened my financial model for REH to update it for the financial results.

In the model I have a few graphs that I like to look at (my limited mental plasticity means that looking at a picture is easier for me to see what is happening, than by looking at a lot of numbers.)

Two of the charts in my REH model look like no other similar charts for any other company that I closely follow, namely graphs of

1. Gross Profit Margin
2. Cost of Doing Business - to - Sales

For just about every other "growth" business I follow, GP Margins are relatively unchanged over time (they might demonstrate some degree of cyclical variation around a mean), and Cost of Doing Business -to-Sales declines, as expected due to Revenue growth exceeding the growth in the Cost of Doing Business.

This is perfectly intuitive, I'm sure most will agree.


But for REH, this situation is totally different:

GP Margins have risen in a secular fashion over the past 20 years, from around 26.5% in 2001, to 33.3% in FY2016.

And Cost of Doing Business - to - Sales has been flat as a tack for the past decade, despite the more than doubling of Revenue over that period.

I have my own theories why this highly unusual situation is the case, but they aren't very convincing, I don't think.

So I would welcome any other thoughts from those who might view things in a less blinkered lens to me.

(If anyone wants to actually see the charts, and can coach me how to attach them, I will do so. )