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GuruFocus has detected 3 Warning Signs with Meritage Homes Corp \$MTH.
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Meritage Homes Corp (NYSE:MTH)
Gross Profit
\$522 Mil (TTM As of Dec. 2016)

Meritage Homes Corp's gross profit for the three months ended in Dec. 2016 was \$136 Mil. Meritage Homes Corp's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$522 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Meritage Homes Corp's gross profit for the three months ended in Dec. 2016 was \$136 Mil. Meritage Homes Corp's revenue for the three months ended in Dec. 2016 was \$861 Mil. Therefore, Meritage Homes Corp's Gross Margin for the quarter that ended in Dec. 2016 was 15.81%.

Meritage Homes Corp had a gross margin of 15.81% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Meritage Homes Corp was 22.49%. The lowest was -2.42%. And the median was 17.58%.

Definition

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

Meritage Homes Corp's Gross Profit for the fiscal year that ended in Dec. 2016 is calculated as

 Gross Profit (A: Dec. 2016 ) = Revenue - Cost of Goods Sold = 3029.227 - 2503.602 = 526

Meritage Homes 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 = 860.791 - 724.705 = 136

Meritage Homes Corp Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 103.796 (Mar. 2016 ) + 143.867 (Jun. 2016 ) + 137.83 (Sep. 2016 ) + 136.086 (Dec. 2016 ) = \$522 Mil.

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

Meritage Homes 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 = 136 / 860.791 = 15.81 %

* 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

Meritage Homes Corp had a gross margin of 15.81% for the quarter that ended in Dec. 2016 => 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.

Meritage Homes Corp Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 13 -37 4 168 148 228 412 448 484 526

Meritage Homes Corp Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 115 125 96 119 132 133 104 144 138 136
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