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GuruFocus has detected 5 Warning Signs with eBay Inc \$EBAY.
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eBay Inc (NAS:EBAY)
Gross Profit
\$7,014 Mil (TTM As of Mar. 2017)

eBay Inc's gross profit for the three months ended in Mar. 2017 was \$1,702 Mil. eBay Inc's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was \$7,014 Mil.

Gross Margin is calculated as gross profit divided by its revenue. eBay Inc's gross profit for the three months ended in Mar. 2017 was \$1,702 Mil. eBay Inc's revenue for the three months ended in Mar. 2017 was \$2,217 Mil. Therefore, eBay Inc's Gross Margin for the quarter that ended in Mar. 2017 was 76.77%.

eBay Inc had a gross margin of 76.77% for the quarter that ended in Mar. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of eBay Inc was 81.93%. The lowest was 70.04%. And the median was 75.47%.

Definition

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

eBay Inc's Gross Profit for the fiscal year that ended in Dec. 2016 is calculated as

 Gross Profit (A: Dec. 2016 ) = Revenue - Cost of Goods Sold = 8979 - 2007 = 6,972

eBay Inc's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

 Gross Profit (Q: Mar. 2017 ) = Revenue - Cost of Goods Sold = 2217 - 515 = 1,702

eBay Inc Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 1737 (Jun. 2016 ) + 1719 (Sep. 2016 ) + 1856 (Dec. 2016 ) + 1702 (Mar. 2017 ) = \$7,014 Mil.

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

eBay Inc's Gross Margin for the quarter that ended in Mar. 2017 is calculated as

 Gross Margin (Q: Mar. 2017 ) = Gross Profit (Q: Mar. 2017 ) / Revenue (Q: Mar. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 1,702 / 2217 = 76.77 %

* 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

eBay Inc had a gross margin of 76.77% for the quarter that ended in Mar. 2017 => 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.

eBay Inc Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 5,909 6,313 6,248 6,592 8,191 9,856 6,765 7,127 6,821 6,972

eBay Inc Quarterly Data

 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Gross_Profit 1,881 1,650 1,676 1,666 1,829 1,660 1,737 1,719 1,856 1,702
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