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Coventry Health Care, Inc. (NYSE:CVH)
Gross Profit
$2,951 Mil (TTM As of Mar. 2013)

Coventry Health Care, Inc.'s gross profit for the three months ended in Mar. 2013 was $774 Mil. Coventry Health Care, Inc.'s gross profit for the trailing twelve months (TTM) ended in Mar. 2013 was $2,951 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Coventry Health Care, Inc.'s gross profit for the three months ended in Mar. 2013 was $774 Mil. Coventry Health Care, Inc.'s revenue for the three months ended in Mar. 2013 was $3,520 Mil. Therefore, Coventry Health Care, Inc.'s Gross Margin for the quarter that ended in Mar. 2013 was 21.99%.

Coventry Health Care, Inc. had a gross margin of 21.99% for the quarter that ended in Mar. 2013 => Competition eroding margins


Definition

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

Coventry Health Care, Inc.'s Gross Profit for the fiscal year that ended in Dec. 2012 is calculated as

Gross Profit (A: Dec. 2012 )=Revenue - Cost of Goods Sold
=14113.363 - 11120.577
=2,993

Coventry Health Care, Inc.'s Gross Profit for the quarter that ended in Mar. 2013 is calculated as

Gross Profit (Q: Mar. 2013 )=Revenue - Cost of Goods Sold
=3520.235 - 2746.136
=774

Coventry Health Care, Inc. Gross Profit for the trailing twelve months (TTM) ended in Mar. 2013 was 693.498 (Jun. 2012 ) + 716.818 (Sep. 2012 ) + 766.803 (Dec. 2012 ) + 774.099 (Mar. 2013 ) = $2,951 Mil.

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

Coventry Health Care, Inc.'s Gross Margin for the quarter that ended in Mar. 2013 is calculated as

Gross Margin (Q: Mar. 2013 )=Gross Profit (Q: Mar. 2013 ) / Revenue (Q: Mar. 2013 )
=(Revenue - Cost of Goods Sold) / Revenue
=774 / 3520.235
=21.99 %

* 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

Coventry Health Care, Inc. had a gross margin of 21.99% for the quarter that ended in Mar. 2013 => Competition eroding margins


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.

Coventry Health Care, Inc. Annual Data

Dec03Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12
Gross_Profit 9281,1262,0602,2942,8652,8492,8033,0702,8622,993

Coventry Health Care, Inc. Quarterly Data

Dec10Mar11Jun11Sep11Dec11Mar12Jun12Sep12Dec12Mar13
Gross_Profit 805706714718723816693717767774
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