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Five Star Quality Care Inc (NYSE:FVE)
Gross Profit
$695 Mil (TTM As of Dec. 2015)

Five Star Quality Care Inc's gross profit for the three months ended in Dec. 2015 was $207 Mil. Five Star Quality Care Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2015 was $695 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Five Star Quality Care Inc's gross profit for the three months ended in Dec. 2015 was $207 Mil. Five Star Quality Care Inc's revenue for the three months ended in Dec. 2015 was $345 Mil. Therefore, Five Star Quality Care Inc's Gross Margin for the quarter that ended in Dec. 2015 was 59.95%.

Five Star Quality Care Inc had a gross margin of 59.95% for the quarter that ended in Dec. 2015 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Five Star Quality Care Inc was 76.48%. The lowest was 21.57%. And the median was 61.18%.

Warning Sign:

Five Star Quality Care Inc gross margin has been in long term decline. The average rate of decline per year is -5%.


Definition

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

Five Star Quality Care Inc's Gross Profit for the fiscal year that ended in Dec. 2015 is calculated as

Gross Profit (A: Dec. 2015 )=Revenue - Cost of Goods Sold
=1365.41 - 534.212
=831

Five Star Quality Care Inc's Gross Profit for the quarter that ended in Dec. 2015 is calculated as

Gross Profit (Q: Dec. 2015 )=Revenue - Cost of Goods Sold
=344.596 - 138.023
=207

Five Star Quality Care Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2015 was 205.471 (Mar. 2015 ) + 73.038 (Jun. 2015 ) + 209.765 (Sep. 2015 ) + 206.573 (Dec. 2015 ) = $695 Mil.

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

Five Star Quality Care Inc's Gross Margin for the quarter that ended in Dec. 2015 is calculated as

Gross Margin (Q: Dec. 2015 )=Gross Profit (Q: Dec. 2015 ) / Revenue (Q: Dec. 2015 )
=(Revenue - Cost of Goods Sold) / Revenue
=207 / 344.596
=59.95 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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

Five Star Quality Care Inc had a gross margin of 59.95% for the quarter that ended in Dec. 2015 => 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 own currency.

Five Star Quality Care Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross_Profit 180210241256758791818820817831

Five Star Quality Care Inc Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
Gross_Profit 2042042017320919920573210207
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