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GuruFocus has detected 3 Warning Signs with F5 Networks Inc \$FFIV.
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F5 Networks Inc (NAS:FFIV)
Gross Profit
\$1,685 Mil (TTM As of Dec. 2016)

F5 Networks Inc's gross profit for the three months ended in Dec. 2016 was \$431 Mil. F5 Networks Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$1,685 Mil.

Gross Margin is calculated as gross profit divided by its revenue. F5 Networks Inc's gross profit for the three months ended in Dec. 2016 was \$431 Mil. F5 Networks Inc's revenue for the three months ended in Dec. 2016 was \$516 Mil. Therefore, F5 Networks Inc's Gross Margin for the quarter that ended in Dec. 2016 was 83.48%.

F5 Networks Inc had a gross margin of 83.48% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of F5 Networks Inc was 83.34%. The lowest was 77.08%. And the median was 82.02%.

Definition

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

F5 Networks Inc's Gross Profit for the fiscal year that ended in Sep. 2016 is calculated as

 Gross Profit (A: Sep. 2016 ) = Revenue - Cost of Goods Sold = 1995.034 - 337.205 = 1,658

F5 Networks Inc's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 515.958 - 85.262 = 431

F5 Networks Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 401.447 (Mar. 2016 ) + 412.179 (Jun. 2016 ) + 440.4 (Sep. 2016 ) + 430.696 (Dec. 2016 ) = \$1,685 Mil.

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

F5 Networks Inc'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 = 431 / 515.958 = 83.48 %

* 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

F5 Networks Inc had a gross margin of 83.48% 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.

F5 Networks Inc Annual Data

 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13 Sep14 Sep15 Sep16 Gross_Profit 407 501 510 710 944 1,141 1,228 1,422 1,588 1,658

F5 Networks Inc Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 383 383 390 398 417 404 401 412 440 431
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