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GuruFocus has detected 4 Warning Signs with KLA-Tencor Corp \$KLAC.
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KLA-Tencor Corp (NAS:KLAC)
Gross Profit
\$2,051 Mil (TTM As of Dec. 2016)

KLA-Tencor Corp's gross profit for the three months ended in Dec. 2016 was \$558 Mil. KLA-Tencor Corp's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$2,051 Mil.

Gross Margin is calculated as gross profit divided by its revenue. KLA-Tencor Corp's gross profit for the three months ended in Dec. 2016 was \$558 Mil. KLA-Tencor Corp's revenue for the three months ended in Dec. 2016 was \$877 Mil. Therefore, KLA-Tencor Corp's Gross Margin for the quarter that ended in Dec. 2016 was 63.68%.

KLA-Tencor Corp had a gross margin of 63.68% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of KLA-Tencor Corp was 62.92%. The lowest was 43.11%. And the median was 56.65%.

Definition

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

KLA-Tencor Corp's Gross Profit for the fiscal year that ended in Jun. 2016 is calculated as

 Gross Profit (A: Jun. 2016 ) = Revenue - Cost of Goods Sold = 2984.493 - 1163.391 = 1,821

KLA-Tencor Corp's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 876.885 - 318.507 = 558

KLA-Tencor Corp Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 437.834 (Mar. 2016 ) + 581.603 (Jun. 2016 ) + 472.837 (Sep. 2016 ) + 558.378 (Dec. 2016 ) = \$2,051 Mil.

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

KLA-Tencor Corp'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 = 558 / 876.885 = 63.68 %

* 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

KLA-Tencor Corp had a gross margin of 63.68% 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.

KLA-Tencor Corp Annual Data

 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12 Jun13 Jun14 Jun15 Jun16 Gross_Profit 1,541 1,376 655 1,005 1,916 1,842 1,605 1,696 1,599 1,821

KLA-Tencor Corp Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 354 393 418 433 372 429 438 582 473 558
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