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GuruFocus has detected 4 Warning Signs with Diageo PLC \$DEO.
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Diageo PLC (NYSE:DEO)
Gross Profit
\$8,855 Mil (TTM As of Dec. 2016)

Diageo PLC's gross profit for the six months ended in Dec. 2016 was \$4,939 Mil. Diageo PLC's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$8,855 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Diageo PLC's gross profit for the six months ended in Dec. 2016 was \$4,939 Mil. Diageo PLC's revenue for the six months ended in Dec. 2016 was \$8,016 Mil. Therefore, Diageo PLC's Gross Margin for the quarter that ended in Dec. 2016 was 61.61%.

Diageo PLC had a gross margin of 61.61% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Diageo PLC was 60.90%. The lowest was 57.37%. And the median was 59.75%.

Definition

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

Diageo PLC's Gross Profit for the fiscal year that ended in Jun. 2016 is calculated as

 Gross Profit (A: Jun. 2016 ) = Revenue - Cost of Goods Sold = 14893.4659091 - 6038.35227273 = 8,855

Diageo PLC's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 8016.22971286 - 3077.40324594 = 4,939

For company reported semi-annually, GuruFocus uses latest annual data as the TTM data. Diageo PLC Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$8,855 Mil.

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

Diageo PLC'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 = 4,939 / 8016.22971286 = 61.61 %

* 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

Diageo PLC had a gross margin of 61.61% for the quarter that ended in Dec. 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.

Diageo PLC Annual Data

 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12 Jun13 Jun14 Jun15 Jun16 Gross_Profit 8,899 9,535 8,884 8,391 9,605 10,114 10,795 10,540 9,662 8,855

Diageo PLC Semi-Annual Data

 Jun12 Dec12 Jun13 Dec13 Jun14 Dec14 Jun15 Dec15 Jun16 Dec16 Gross_Profit 4,565 6,079 4,961 6,118 4,225 5,433 4,254 4,961 4,148 4,939
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