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Arthur J. Gallagher & Co (NYSE:AJG)
Gross Profit
\$1,636 Mil (TTM As of Sep. 2016)

Arthur J. Gallagher & Co's gross profit for the three months ended in Sep. 2016 was \$406 Mil. Arthur J. Gallagher & Co's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was \$1,636 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Arthur J. Gallagher & Co's gross profit for the three months ended in Sep. 2016 was \$406 Mil. Arthur J. Gallagher & Co's revenue for the three months ended in Sep. 2016 was \$1,482 Mil. Therefore, Arthur J. Gallagher & Co's Gross Margin for the quarter that ended in Sep. 2016 was 27.39%.

Arthur J. Gallagher & Co had a gross margin of 27.39% for the quarter that ended in Sep. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Arthur J. Gallagher & Co was 76.83%. The lowest was 29.50%. And the median was 36.50%.

Warning Sign:

Arthur J. Gallagher & Co gross margin has been in long term decline. The average rate of decline per year is -4.6%.

Definition

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

Arthur J. Gallagher & Co'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 = 5392.4 - 3780.4 = 1,612

Arthur J. Gallagher & Co's Gross Profit for the quarter that ended in Sep. 2016 is calculated as

 Gross Profit (Q: Sep. 2016 ) = Revenue - Cost of Goods Sold = 1482.3 - 1076.3 = 406

Arthur J. Gallagher & Co Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was 384.7 (Dec. 2015 ) + 373.9 (Mar. 2016 ) + 471.1 (Jun. 2016 ) + 406 (Sep. 2016 ) = \$1,636 Mil.

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

Arthur J. Gallagher & Co's Gross Margin for the quarter that ended in Sep. 2016 is calculated as

 Gross Margin (Q: Sep. 2016 ) = Gross Profit (Q: Sep. 2016 ) / Revenue (Q: Sep. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 406 / 1482.3 = 27.39 %

* 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

Arthur J. Gallagher & Co had a gross margin of 27.39% for the quarter that ended in Sep. 2016 => Competition eroding margins

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.

Arthur J. Gallagher & Co Annual Data

 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Gross_Profit 1,054 1,186 1,264 661 683 777 915 1,057 1,400 1,612

Arthur J. Gallagher & Co Quarterly Data

 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Gross_Profit 379 396 348 347 450 431 385 374 471 406
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