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EarthLink Holdings Corp (NAS:ELNK)
Gross Profit
$618 Mil (TTM As of Sep. 2014)

EarthLink Holdings Corp's gross profit for the three months ended in Sep. 2014 was $162 Mil. EarthLink Holdings Corp's gross profit for the trailing twelve months (TTM) ended in Sep. 2014 was $618 Mil.

Gross Margin is calculated as gross profit divided by its revenue. EarthLink Holdings Corp's gross profit for the three months ended in Sep. 2014 was $162 Mil. EarthLink Holdings Corp's revenue for the three months ended in Sep. 2014 was $298 Mil. Therefore, EarthLink Holdings Corp's Gross Margin for the quarter that ended in Sep. 2014 was 54.43%.

EarthLink Holdings Corp had a gross margin of 54.43% for the quarter that ended in Sep. 2014 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of EarthLink Holdings Corp was 91.35%. The lowest was 31.80%. And the median was 60.53%.

Warning Sign:

EarthLink Holdings Corp gross margin has been in long term decline. The average rate of decline per year is -4.4%.


Definition

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

EarthLink Holdings Corp's Gross Profit for the fiscal year that ended in Dec. 2013 is calculated as

Gross Profit (A: Dec. 2013 )=Revenue - Cost of Goods Sold
=1240.606 - 600.742
=640

EarthLink Holdings Corp's Gross Profit for the quarter that ended in Sep. 2014 is calculated as

Gross Profit (Q: Sep. 2014 )=Revenue - Cost of Goods Sold
=297.745 - 135.695
=162

EarthLink Holdings Corp Gross Profit for the trailing twelve months (TTM) ended in Sep. 2014 was 151.661 (Dec. 2013 ) + 151.444 (Mar. 2014 ) + 153.17 (Jun. 2014 ) + 162.05 (Sep. 2014 ) = $618 Mil.

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

EarthLink Holdings Corp's Gross Margin for the quarter that ended in Sep. 2014 is calculated as

Gross Margin (Q: Sep. 2014 )=Gross Profit (Q: Sep. 2014 ) / Revenue (Q: Sep. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=162 / 297.745
=54.43 %

* 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

EarthLink Holdings Corp had a gross margin of 54.43% for the quarter that ended in Sep. 2014 => Durable competitive advantage


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.

EarthLink Holdings Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross_Profit 941681866773595450388724707640

EarthLink Holdings Corp Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
Gross_Profit 170177175164160164152151153162
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