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Arch Coal Inc (NYSE:ACI)
Gross Profit
\$371 Mil (TTM As of Dec. 2014)

Arch Coal Inc's gross profit for the three months ended in Dec. 2014 was \$135 Mil. Arch Coal Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2014 was \$371 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Arch Coal Inc's gross profit for the three months ended in Dec. 2014 was \$135 Mil. Arch Coal Inc's revenue for the three months ended in Dec. 2014 was \$745 Mil. Therefore, Arch Coal Inc's Gross Margin for the quarter that ended in Dec. 2014 was 18.06%.

Arch Coal Inc had a gross margin of 18.06% for the quarter that ended in Dec. 2014 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Arch Coal Inc was 26.81%. The lowest was 4.14%. And the median was 20.40%.

Warning Sign:

Arch Coal Inc gross margin has been in long term decline. The average rate of decline per year is -12.9%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Arch Coal Inc's Gross Profit for the fiscal year that ended in Dec. 2014 is calculated as

 Gross Profit (A: Dec. 2014 ) = Revenue - Cost of Goods Sold = 2937.119 - 2566.193 = 371

Arch Coal Inc's Gross Profit for the quarter that ended in Dec. 2014 is calculated as

 Gross Profit (Q: Dec. 2014 ) = Revenue - Cost of Goods Sold = 745.192 - 610.646 = 135

Arch Coal Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2014 was 49.657 (Mar. 2014 ) + 91.639 (Jun. 2014 ) + 95.084 (Sep. 2014 ) + 134.546 (Dec. 2014 ) = \$371 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Arch Coal Inc's Gross Margin for the quarter that ended in Dec. 2014 is calculated as

 Gross Margin (Q: Dec. 2014 ) = Gross Profit (Q: Dec. 2014 ) / Revenue (Q: Dec. 2014 ) = (Revenue - Cost of Goods Sold) / Revenue = 135 / 745.192 = 18.06 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Arch Coal Inc had a gross margin of 18.06% for the quarter that ended in Dec. 2014 => No sustainable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Arch Coal Inc Annual Data

 Dec05 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Gross_Profit 335 591 525 800 505 790 1,018 721 351 371

Arch Coal Inc Quarterly Data

 Sep12 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Gross_Profit 191 159 115 110 103 51 50 92 95 135
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