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GuruFocus has detected 1 Warning Sign with CarMax Inc \$KMX.
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CarMax Inc (NYSE:KMX)
Gross Profit
\$2,183 Mil (TTM As of Feb. 2017)

CarMax Inc's gross profit for the three months ended in Feb. 2017 was \$562 Mil. CarMax Inc's gross profit for the trailing twelve months (TTM) ended in Feb. 2017 was \$2,183 Mil.

Gross Margin is calculated as gross profit divided by its revenue. CarMax Inc's gross profit for the three months ended in Feb. 2017 was \$562 Mil. CarMax Inc's revenue for the three months ended in Feb. 2017 was \$4,050 Mil. Therefore, CarMax Inc's Gross Margin for the quarter that ended in Feb. 2017 was 13.88%.

CarMax Inc had a gross margin of 13.88% for the quarter that ended in Feb. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of CarMax Inc was 14.71%. The lowest was 13.08%. And the median was 13.56%.

Definition

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

CarMax Inc's Gross Profit for the fiscal year that ended in Feb. 2017 is calculated as

 Gross Profit (A: Feb. 2017 ) = Revenue - Cost of Goods Sold = 15875.118 - 13691.824 = 2,183

CarMax Inc's Gross Profit for the quarter that ended in Feb. 2017 is calculated as

 Gross Profit (Q: Feb. 2017 ) = Revenue - Cost of Goods Sold = 4049.96 - 3487.8 = 562

CarMax Inc Gross Profit for the trailing twelve months (TTM) ended in Feb. 2017 was 572.637 (May. 2016 ) + 545.362 (Aug. 2016 ) + 503.135 (Nov. 2016 ) + 562.16 (Feb. 2017 ) = \$2,183 Mil.

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

CarMax Inc's Gross Margin for the quarter that ended in Feb. 2017 is calculated as

 Gross Margin (Q: Feb. 2017 ) = Gross Profit (Q: Feb. 2017 ) / Revenue (Q: Feb. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 562 / 4049.96 = 13.88 %

* 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

CarMax Inc had a gross margin of 13.88% for the quarter that ended in Feb. 2017 => No sustainable 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.

CarMax Inc Annual Data

 Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 Feb14 Feb15 Feb16 Feb17 Gross_Profit 1,072 968 1,099 1,301 1,379 1,464 1,649 1,888 2,019 2,183

CarMax Inc Quarterly Data

 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 Gross_Profit 447 476 544 521 464 489 573 545 503 562
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