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Electro Rent Corp (NAS:ELRC)
Gross Profit
$150.2 Mil (TTM As of Feb. 2014)

Electro Rent Corp's gross profit for the three months ended in Feb. 2014 was $35.9 Mil. Electro Rent Corp's gross profit for the trailing twelve months (TTM) ended in Feb. 2014 was $150.2 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Electro Rent Corp's gross profit for the three months ended in Feb. 2014 was $35.9 Mil. Electro Rent Corp's revenue for the three months ended in Feb. 2014 was $62.0 Mil. Therefore, Electro Rent Corp's Gross Margin for the quarter that ended in Feb. 2014 was 57.95%.

Electro Rent Corp had a gross margin of 57.95% for the quarter that ended in Feb. 2014 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Electro Rent Corp was 89.43%. The lowest was 57.53%. And the median was 84.89%.

Warning Sign:

Electro Rent Corp gross margin has been in long term decline. The average rate of decline per year is -8%.


Definition

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

Electro Rent Corp's Gross Profit for the fiscal year that ended in May. 2013 is calculated as

Gross Profit (A: May. 2013 )=Revenue - Cost of Goods Sold
=248.731 - 98.682
=150.0

Electro Rent Corp's Gross Profit for the quarter that ended in Feb. 2014 is calculated as

Gross Profit (Q: Feb. 2014 )=Revenue - Cost of Goods Sold
=62.016 - 26.076
=35.9

Electro Rent Corp Gross Profit for the trailing twelve months (TTM) ended in Feb. 2014 was 39.019 (May. 2013 ) + 37.838 (Aug. 2013 ) + 37.379 (Nov. 2013 ) + 35.94 (Feb. 2014 ) = $150.2 Mil.

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

Electro Rent Corp's Gross Margin for the quarter that ended in Feb. 2014 is calculated as

Gross Margin (Q: Feb. 2014 )=Gross Profit (Q: Feb. 2014 ) / Revenue (Q: Feb. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=35.9 / 62.016
=57.95 %

* 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

Electro Rent Corp had a gross margin of 57.95% for the quarter that ended in Feb. 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.

Electro Rent Corp Annual Data

May04May05May06May07May08May09May10May11May12May13
Gross_Profit 79.995.1101.2111.6119.6107.9106.8132.1143.0150.0

Electro Rent Corp Quarterly Data

Nov11Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14
Gross_Profit 36.034.638.236.138.536.539.037.837.435.9
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