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GuruFocus has detected 6 Warning Signs with Flex Ltd \$FLEX.
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Flex Ltd (NAS:FLEX)
Gross Profit
\$1,542 Mil (TTM As of Dec. 2016)

Flex Ltd's gross profit for the three months ended in Dec. 2016 was \$416 Mil. Flex Ltd's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$1,542 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Flex Ltd's gross profit for the three months ended in Dec. 2016 was \$416 Mil. Flex Ltd's revenue for the three months ended in Dec. 2016 was \$6,115 Mil. Therefore, Flex Ltd's Gross Margin for the quarter that ended in Dec. 2016 was 6.81%.

Flex Ltd had a gross margin of 6.81% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Flex Ltd was 6.59%. The lowest was 4.14%. And the median was 5.11%.

Definition

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

Flex Ltd'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 = 24418.885 - 22810.824 = 1,608

Flex Ltd's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 6114.999 - 5698.544 = 416

Flex Ltd Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 406.337 (Mar. 2016 ) + 405.995 (Jun. 2016 ) + 313.691 (Sep. 2016 ) + 416.455 (Dec. 2016 ) = \$1,542 Mil.

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

Flex Ltd'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 = 416 / 6114.999 = 6.81 %

* 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

Flex Ltd had a gross margin of 6.81% 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.

Flex Ltd Annual Data

 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Mar14 Mar15 Mar16 Gross_Profit 929 1,176 1,280 1,218 1,583 1,518 1,166 1,440 1,545 1,608

Flex Ltd Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 377 409 379 352 397 452 406 406 314 416
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