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Health Net Inc (NYSE:HNT)
Gross Profit
$2,164 Mil (TTM As of Dec. 2014)

Health Net Inc's gross profit for the three months ended in Dec. 2014 was $573 Mil. Health Net Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2014 was $2,164 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Health Net Inc's gross profit for the three months ended in Dec. 2014 was $573 Mil. Health Net Inc's revenue for the three months ended in Dec. 2014 was $3,758 Mil. Therefore, Health Net Inc's Gross Margin for the quarter that ended in Dec. 2014 was 15.25%.

Health Net Inc had a gross margin of 15.25% for the quarter that ended in Dec. 2014 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Health Net Inc was 30.80%. The lowest was 11.21%. And the median was 15.45%.


Definition

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

Health Net Inc's Gross Profit for the fiscal year that ended in Dec. 2014 is calculated as

Gross Profit (A: Dec. 2014 )=Revenue - Cost of Goods Sold
=14008.586 - 11844.394
=2,164

Health Net Inc's Gross Profit for the quarter that ended in Dec. 2014 is calculated as

Gross Profit (Q: Dec. 2014 )=Revenue - Cost of Goods Sold
=3758.389 - 3185.278
=573

Health Net Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2014 was 504.619 (Mar. 2014 ) + 525.005 (Jun. 2014 ) + 561.457 (Sep. 2014 ) + 573.111 (Dec. 2014 ) = $2,164 Mil.

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

Health Net Inc's Gross Margin for the quarter that ended in Dec. 2014 is calculated as

Gross Margin (Q: Dec. 2014 )=Gross Profit (Q: Dec. 2014 ) / Revenue (Q: Dec. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=573 / 3758.389
=15.25 %

* 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

Health Net Inc had a gross margin of 15.25% for the quarter that ended in Dec. 2014 => No sustainable 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.

Health Net Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Gross_Profit 1,7162,0364,3451,9012,0421,7271,6381,3681,6642,164

Health Net Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
Gross_Profit 346367403419453389505525561573
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