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GuruFocus has detected 4 Warning Signs with Guidewire Software Inc \$GWRE.
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Guidewire Software Inc (NYSE:GWRE)
Gross Profit
\$285.2 Mil (TTM As of Jan. 2017)

Guidewire Software Inc's gross profit for the three months ended in Jan. 2017 was \$74.8 Mil. Guidewire Software Inc's gross profit for the trailing twelve months (TTM) ended in Jan. 2017 was \$285.2 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Guidewire Software Inc's gross profit for the three months ended in Jan. 2017 was \$74.8 Mil. Guidewire Software Inc's revenue for the three months ended in Jan. 2017 was \$115.6 Mil. Therefore, Guidewire Software Inc's Gross Margin for the quarter that ended in Jan. 2017 was 64.70%.

Guidewire Software Inc had a gross margin of 64.70% for the quarter that ended in Jan. 2017 => Durable competitive advantage

During the past 8 years, the highest Gross Margin of Guidewire Software Inc was 64.23%. The lowest was 50.85%. And the median was 60.79%.

Definition

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

Guidewire Software Inc's Gross Profit for the fiscal year that ended in Jul. 2016 is calculated as

 Gross Profit (A: Jul. 2016 ) = Revenue - Cost of Goods Sold = 424.446 - 151.834 = 272.6

Guidewire Software Inc's Gross Profit for the quarter that ended in Jan. 2017 is calculated as

 Gross Profit (Q: Jan. 2017 ) = Revenue - Cost of Goods Sold = 115.621 - 40.811 = 74.8

Guidewire Software Inc Gross Profit for the trailing twelve months (TTM) ended in Jan. 2017 was 59.853 (Apr. 2016 ) + 98.421 (Jul. 2016 ) + 52.108 (Oct. 2016 ) + 74.81 (Jan. 2017 ) = \$285.2 Mil.

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

Guidewire Software Inc's Gross Margin for the quarter that ended in Jan. 2017 is calculated as

 Gross Margin (Q: Jan. 2017 ) = Gross Profit (Q: Jan. 2017 ) / Revenue (Q: Jan. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 74.8 / 115.621 = 64.70 %

* 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

Guidewire Software Inc had a gross margin of 64.70% for the quarter that ended in Jan. 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.

Guidewire Software Inc Annual Data

 Jul09 Jul10 Jul11 Jul12 Jul13 Jul14 Jul15 Jul16 Gross_Profit 0.0 0.0 43.1 89.2 104.1 142.1 175.0 201.3 233.4 272.6

Guidewire Software Inc Quarterly Data

 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Gross_Profit 44.0 55.4 47.5 86.5 47.1 67.2 59.9 98.4 52.1 74.8
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