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GuruFocus has detected 3 Warning Signs with Capstone Turbine Corp \$CPST.
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Capstone Turbine Corp (NAS:CPST)
Gross Profit
\$1.77 Mil (TTM As of Dec. 2016)

Capstone Turbine Corp's gross profit for the three months ended in Dec. 2016 was \$-4.00 Mil. Capstone Turbine Corp's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$1.77 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Capstone Turbine Corp's gross profit for the three months ended in Dec. 2016 was \$-4.00 Mil. Capstone Turbine Corp's revenue for the three months ended in Dec. 2016 was \$20.19 Mil. Therefore, Capstone Turbine Corp's Gross Margin for the quarter that ended in Dec. 2016 was -19.81%.

Capstone Turbine Corp had a gross margin of -19.81% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Capstone Turbine Corp was 16.30%. The lowest was -23.92%. And the median was 2.15%.

Definition

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

Capstone Turbine Corp's Gross Profit for the fiscal year that ended in Mar. 2016 is calculated as

 Gross Profit (A: Mar. 2016 ) = Revenue - Cost of Goods Sold = 85.211 - 72.444 = 12.77

Capstone Turbine Corp's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 20.185 - 24.184 = -4.00

Capstone Turbine Corp Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 2.103 (Mar. 2016 ) + 2.999 (Jun. 2016 ) + 0.67 (Sep. 2016 ) + -3.999 (Dec. 2016 ) = \$1.77 Mil.

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

Capstone Turbine Corp'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 = -4.00 / 20.185 = -19.81 %

* 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

Capstone Turbine Corp had a gross margin of -19.81% for the quarter that ended in Dec. 2016 => 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 local exchange's currency.

Capstone Turbine Corp Annual Data

 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Mar14 Mar15 Mar16 Gross_Profit -5.03 -3.80 -5.33 -8.45 -0.54 5.43 14.39 21.70 18.29 12.77

Capstone Turbine Corp Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 5.24 6.11 3.52 4.69 1.93 4.05 2.10 3.00 0.67 -4.00
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