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GuruFocus has detected 3 Warning Signs with Goodyear Tire & Rubber Co $GT.
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Goodyear Tire & Rubber Co (NAS:GT)
Gross Profit
$4,186 Mil (TTM As of Dec. 2016)

Goodyear Tire & Rubber Co's gross profit for the three months ended in Dec. 2016 was $1,019 Mil. Goodyear Tire & Rubber Co's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $4,186 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Goodyear Tire & Rubber Co's gross profit for the three months ended in Dec. 2016 was $1,019 Mil. Goodyear Tire & Rubber Co's revenue for the three months ended in Dec. 2016 was $3,741 Mil. Therefore, Goodyear Tire & Rubber Co's Gross Margin for the quarter that ended in Dec. 2016 was 27.24%.

Goodyear Tire & Rubber Co had a gross margin of 27.24% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Goodyear Tire & Rubber Co was 27.62%. The lowest was 16.10%. And the median was 18.62%.


Definition

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

Goodyear Tire & Rubber 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
=15158 - 10972
=4,186

Goodyear Tire & Rubber 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
=3741 - 2722
=1,019

Goodyear Tire & Rubber Co Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 990 (Mar. 2016 ) + 1066 (Jun. 2016 ) + 1111 (Sep. 2016 ) + 1019 (Dec. 2016 ) = $4,186 Mil.

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

Goodyear Tire & Rubber 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
=1,019 / 3741
=27.24 %

* 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

Goodyear Tire & Rubber Co had a gross margin of 27.24% for the quarter that ended in Dec. 2016 => Competition eroding margins


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.

Goodyear Tire & Rubber Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 3,7333,3492,6253,3803,9463,8294,1184,2324,2794,186

Goodyear Tire & Rubber Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 1,1411,0169581,1451,1849929901,0661,1111,019
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