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GuruFocus has detected 3 Warning Signs with W R Grace & Co \$GRA.
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W R Grace & Co (NYSE:GRA)
Gross Profit
\$656 Mil (TTM As of Dec. 2016)

W R Grace & Co's gross profit for the three months ended in Dec. 2016 was \$162 Mil. W R Grace & Co's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$656 Mil.

Gross Margin is calculated as gross profit divided by its revenue. W R Grace & Co's gross profit for the three months ended in Dec. 2016 was \$162 Mil. W R Grace & Co's revenue for the three months ended in Dec. 2016 was \$441 Mil. Therefore, W R Grace & Co's Gross Margin for the quarter that ended in Dec. 2016 was 36.71%.

W R Grace & Co had a gross margin of 36.71% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of W R Grace & Co was 41.03%. The lowest was 29.65%. And the median was 35.39%.

Definition

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

W R Grace & Co'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 = 1598.6 - 942.7 = 656

W R Grace & Co's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 440.8 - 279 = 162

W R Grace & Co Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 152.7 (Mar. 2016 ) + 173.2 (Jun. 2016 ) + 168.2 (Sep. 2016 ) + 161.8 (Dec. 2016 ) = \$656 Mil.

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

W R Grace & Co'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 = 162 / 440.8 = 36.71 %

* 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

W R Grace & Co had a gross margin of 36.71% for the quarter that ended in Dec. 2016 => Competition eroding margins

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.

W R Grace & Co Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 987 984 925 949 1,113 1,114 1,142 664 652 656

W R Grace & Co Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 328 -254 147 168 166 171 153 173 168 162
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