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Penn West Petroleum Ltd (NYSE:PWE)
Gross Profit
$497 Mil (TTM As of Dec. 2015)

Penn West Petroleum Ltd's gross profit for the three months ended in Dec. 2015 was $100 Mil. Penn West Petroleum Ltd's gross profit for the trailing twelve months (TTM) ended in Dec. 2015 was $497 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Penn West Petroleum Ltd's gross profit for the three months ended in Dec. 2015 was $100 Mil. Penn West Petroleum Ltd's revenue for the three months ended in Dec. 2015 was $221 Mil. Therefore, Penn West Petroleum Ltd's Gross Margin for the quarter that ended in Dec. 2015 was 45.21%.

Penn West Petroleum Ltd had a gross margin of 45.21% for the quarter that ended in Dec. 2015 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Penn West Petroleum Ltd was 66.16%. The lowest was 43.07%. And the median was 51.97%.

Warning Sign:

Penn West Petroleum Ltd gross margin has been in long term decline. The average rate of decline per year is -1.8%.


Definition

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

Penn West Petroleum Ltd'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
=1015.8244002 - 562.24021002
=454

Penn West Petroleum Ltd's Gross Profit for the quarter that ended in Dec. 2015 is calculated as

Gross Profit (Q: Dec. 2015 )=Revenue - Cost of Goods Sold
=220.958214833 - 121.053015387
=100

Penn West Petroleum Ltd Gross Profit for the trailing twelve months (TTM) ended in Dec. 2015 was 115.707719131 (Mar. 2015 ) + 140.719773554 (Jun. 2015 ) + 140.208050656 (Sep. 2015 ) + 99.9051994458 (Dec. 2015 ) = $497 Mil.

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

Penn West Petroleum Ltd'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
=100 / 220.958214833
=45.21 %

* 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

Penn West Petroleum Ltd had a gross margin of 45.21% 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.

Penn West Petroleum Ltd Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross_Profit 1,1071,4632,8481,0831,5231,9491,7471,2061,168454

Penn West Petroleum Ltd Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
Gross_Profit 356245286392321212116141140100
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