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GuruFocus has detected 5 Warning Signs with II-VI Inc $IIVI.
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II-VI Inc (NAS:IIVI)
Gross Profit
$352.1 Mil (TTM As of Dec. 2016)

II-VI Inc's gross profit for the three months ended in Dec. 2016 was $94.3 Mil. II-VI Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $352.1 Mil.

Gross Margin is calculated as gross profit divided by its revenue. II-VI Inc's gross profit for the three months ended in Dec. 2016 was $94.3 Mil. II-VI Inc's revenue for the three months ended in Dec. 2016 was $231.8 Mil. Therefore, II-VI Inc's Gross Margin for the quarter that ended in Dec. 2016 was 40.66%.

II-VI Inc had a gross margin of 40.66% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of II-VI Inc was 45.38%. The lowest was 33.18%. And the median was 39.00%.

Warning Sign:

II-VI Inc gross margin has been in long term decline. The average rate of decline per year is -2%.


Definition

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

II-VI Inc's Gross Profit for the fiscal year that ended in Jun. 2016 is calculated as

Gross Profit (A: Jun. 2016 )=Revenue - Cost of Goods Sold
=827.216 - 514.403
=312.8

II-VI 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
=231.822 - 137.559
=94.3

II-VI Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 77.669 (Mar. 2016 ) + 92.611 (Jun. 2016 ) + 87.602 (Sep. 2016 ) + 94.263 (Dec. 2016 ) = $352.1 Mil.

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

II-VI 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
=94.3 / 231.822
=40.66 %

* 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

II-VI Inc had a gross margin of 40.66% for the quarter that ended in Dec. 2016 => 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 local exchange's currency.

II-VI Inc Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
Gross_Profit 119.4130.2123.6134.6206.9201.3203.5226.7271.6312.8

II-VI Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 67.963.065.775.071.271.377.792.687.694.3
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