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GuruFocus has detected 3 Warning Signs with Allegiant Travel Co \$ALGT.
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Allegiant Travel Co (NAS:ALGT)
Gross Profit
\$870 Mil (TTM As of Dec. 2016)

Allegiant Travel Co's gross profit for the three months ended in Dec. 2016 was \$205 Mil. Allegiant Travel Co's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$870 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Allegiant Travel Co's gross profit for the three months ended in Dec. 2016 was \$205 Mil. Allegiant Travel Co's revenue for the three months ended in Dec. 2016 was \$336 Mil. Therefore, Allegiant Travel Co's Gross Margin for the quarter that ended in Dec. 2016 was 60.95%.

Allegiant Travel Co had a gross margin of 60.95% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Allegiant Travel Co was 63.87%. The lowest was 38.14%. And the median was 45.43%.

Definition

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

Allegiant Travel Co's Gross Profit for the fiscal year that ended in Dec. 2016 is calculated as

 Gross Profit (A: Dec. 2016 ) = Revenue - Cost of Goods Sold = 1362.831 - 492.454 = 870

Allegiant Travel Co's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 335.883 - 131.156 = 205

Allegiant Travel Co Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 237.497 (Mar. 2016 ) + 222.257 (Jun. 2016 ) + 205.661 (Sep. 2016 ) + 204.727 (Dec. 2016 ) = \$870 Mil.

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

Allegiant Travel Co's Gross Margin for the quarter that ended in Dec. 2016 is calculated as

 Gross Margin (Q: Dec. 2016 ) = Gross Profit (Q: Dec. 2016 ) / Revenue (Q: Dec. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 205 / 335.883 = 60.95 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's 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

Allegiant Travel Co had a gross margin of 60.95% for the quarter that ended in Dec. 2016 => Durable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Allegiant Travel Co Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 152 192 288 297 301 378 460 577 789 870

Allegiant Travel Co Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 127 156 214 195 180 200 237 222 206 205
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