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GuruFocus has detected 2 Warning Signs with First Solar Inc \$FSLR.
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First Solar Inc (NAS:FSLR)
Gross Profit
\$704 Mil (TTM As of Dec. 2016)

First Solar Inc's gross profit for the three months ended in Dec. 2016 was \$64 Mil. First Solar Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$704 Mil.

Gross Margin is calculated as gross profit divided by its revenue. First Solar Inc's gross profit for the three months ended in Dec. 2016 was \$64 Mil. First Solar Inc's revenue for the three months ended in Dec. 2016 was \$480 Mil. Therefore, First Solar Inc's Gross Margin for the quarter that ended in Dec. 2016 was 13.24%.

First Solar Inc had a gross margin of 13.24% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of First Solar Inc was 54.43%. The lowest was 23.85%. And the median was 30.63%.

Warning Sign:

First Solar Inc gross margin has been in long term decline. The average rate of decline per year is -5.5%.

Definition

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

First Solar Inc'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 = 2951.328 - 2247.349 = 704

First Solar Inc's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 480.434 - 416.845 = 64

First Solar Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 262.945 (Mar. 2016 ) + 191.165 (Jun. 2016 ) + 186.28 (Sep. 2016 ) + 63.589 (Dec. 2016 ) = \$704 Mil.

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

First Solar Inc'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 = 64 / 480.434 = 13.24 %

* 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

First Solar Inc had a gross margin of 13.24% 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.

First Solar Inc Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 251 678 1,045 1,185 972 853 865 825 919 704

First Solar Inc Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 189 308 39 164 484 231 263 191 186 64
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