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GuruFocus has detected 2 Warning Signs with Devon Energy Corp $DVN.
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Devon Energy Corp (NYSE:DVN)
Gross Profit
$8,211 Mil (TTM As of Dec. 2016)

Devon Energy Corp's gross profit for the three months ended in Dec. 2016 was $2,983 Mil. Devon Energy Corp's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $8,211 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Devon Energy Corp's gross profit for the three months ended in Dec. 2016 was $2,983 Mil. Devon Energy Corp's revenue for the three months ended in Dec. 2016 was $3,350 Mil. Therefore, Devon Energy Corp's Gross Margin for the quarter that ended in Dec. 2016 was 89.04%.

Devon Energy Corp had a gross margin of 89.04% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Devon Energy Corp was 88.70%. The lowest was 63.25%. And the median was 71.24%.


Definition

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

Devon Energy Corp'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
=12197 - 1582
=10,615

Devon Energy 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
=3350 - 367
=2,983

Devon Energy Corp Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 616 (Mar. 2016 ) + 734 (Jun. 2016 ) + 3878 (Sep. 2016 ) + 2983 (Dec. 2016 ) = $8,211 Mil.

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

Devon Energy 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
=2,983 / 3350
=89.04 %

* 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

Devon Energy Corp had a gross margin of 89.04% for the quarter that ended in Dec. 2016 => Durable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

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

Devon Energy Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 8,30710,3965,3236,8947,8786,1816,57618,30611,04110,615

Devon Energy Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 4,7526,4991,2739683,0912,4076167343,8782,983
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