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GuruFocus has detected 5 Warning Signs with Owens-Illinois Inc $OI.
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Owens-Illinois Inc (NYSE:OI)
Gross Profit
$1,212 Mil (TTM As of Dec. 2016)

Owens-Illinois Inc's gross profit for the three months ended in Dec. 2016 was $215 Mil. Owens-Illinois Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $1,212 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Owens-Illinois Inc's gross profit for the three months ended in Dec. 2016 was $215 Mil. Owens-Illinois Inc's revenue for the three months ended in Dec. 2016 was $1,642 Mil. Therefore, Owens-Illinois Inc's Gross Margin for the quarter that ended in Dec. 2016 was 13.09%.

Owens-Illinois Inc had a gross margin of 13.09% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Owens-Illinois Inc was 21.26%. The lowest was 18.03%. And the median was 19.37%.

Warning Sign:

Owens-Illinois Inc gross margin has been in long term decline. The average rate of decline per year is -1.4%.


Definition

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

Owens-Illinois 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
=6702 - 5490
=1,212

Owens-Illinois 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
=1642 - 1427
=215

Owens-Illinois Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 319 (Mar. 2016 ) + 342 (Jun. 2016 ) + 336 (Sep. 2016 ) + 215 (Dec. 2016 ) = $1,212 Mil.

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

Owens-Illinois 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
=215 / 1642
=13.09 %

* 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

Owens-Illinois Inc had a gross margin of 13.09% for the quarter that ended in Dec. 2016 => No sustainable 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.

Owens-Illinois Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 1,5951,6771,3351,3501,3891,3741,3311,2531,1101,212

Owens-Illinois Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 337237268274276292319342336215
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