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GuruFocus has detected 2 Warning Signs with Constellation Brands Inc \$STZ.
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Constellation Brands Inc (NYSE:STZ)
Gross Profit
\$3,438 Mil (TTM As of Nov. 2016)

Constellation Brands Inc's gross profit for the three months ended in Nov. 2016 was \$891 Mil. Constellation Brands Inc's gross profit for the trailing twelve months (TTM) ended in Nov. 2016 was \$3,438 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Constellation Brands Inc's gross profit for the three months ended in Nov. 2016 was \$891 Mil. Constellation Brands Inc's revenue for the three months ended in Nov. 2016 was \$1,811 Mil. Therefore, Constellation Brands Inc's Gross Margin for the quarter that ended in Nov. 2016 was 49.24%.

Constellation Brands Inc had a gross margin of 49.24% for the quarter that ended in Nov. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Constellation Brands Inc was 47.44%. The lowest was 29.21%. And the median was 37.68%.

Definition

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

Constellation Brands Inc's Gross Profit for the fiscal year that ended in Feb. 2016 is calculated as

 Gross Profit (A: Feb. 2016 ) = Revenue - Cost of Goods Sold = 6548.4 - 3606.1 = 2,942

Constellation Brands Inc's Gross Profit for the quarter that ended in Nov. 2016 is calculated as

 Gross Profit (Q: Nov. 2016 ) = Revenue - Cost of Goods Sold = 1810.5 - 919.1 = 891

Constellation Brands Inc Gross Profit for the trailing twelve months (TTM) ended in Nov. 2016 was 696.1 (Feb. 2016 ) + 881.3 (May. 2016 ) + 969 (Aug. 2016 ) + 891.4 (Nov. 2016 ) = \$3,438 Mil.

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

Constellation Brands Inc's Gross Margin for the quarter that ended in Nov. 2016 is calculated as

 Gross Margin (Q: Nov. 2016 ) = Gross Profit (Q: Nov. 2016 ) / Revenue (Q: Nov. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 891 / 1810.5 = 49.24 %

* 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

Constellation Brands Inc had a gross margin of 49.24% for the quarter that ended in Nov. 2016 => Durable competitive advantage

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.

Constellation Brands Inc Annual Data

 Feb07 Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 Feb14 Feb15 Feb16 Gross_Profit 1,524 1,282 1,230 1,145 1,190 1,062 1,108 1,992 2,579 2,942

Constellation Brands Inc Quarterly Data

 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Gross_Profit 672 639 598 737 776 734 696 881 969 891
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