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National Oilwell Varco Inc (NYSE:NOV)
Gross Profit
$5,920 Mil (TTM As of Dec. 2014)

National Oilwell Varco Inc's gross profit for the three months ended in Dec. 2014 was $1,541 Mil. National Oilwell Varco Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2014 was $5,920 Mil.

Gross Margin is calculated as gross profit divided by its revenue. National Oilwell Varco Inc's gross profit for the three months ended in Dec. 2014 was $1,541 Mil. National Oilwell Varco Inc's revenue for the three months ended in Dec. 2014 was $5,709 Mil. Therefore, National Oilwell Varco Inc's Gross Margin for the quarter that ended in Dec. 2014 was 26.99%.

National Oilwell Varco Inc had a gross margin of 26.99% for the quarter that ended in Dec. 2014 => Competition eroding margins

During the past 13 years, the highest Gross Margin of National Oilwell Varco Inc was 31.52%. The lowest was 17.22%. And the median was 25.06%.

Warning Sign:

National Oilwell Varco Inc gross margin has been in long term decline. The average rate of decline per year is -3.2%.


Definition

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

National Oilwell Varco 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
=21440 - 15631
=5,809

National Oilwell Varco 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
=5709 - 4168
=1,541

National Oilwell Varco Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2014 was 1396 (Mar. 2014 ) + 1455 (Jun. 2014 ) + 1528 (Sep. 2014 ) + 1541 (Dec. 2014 ) = $5,920 Mil.

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

National Oilwell Varco 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
=1,541 / 5709
=26.99 %

* 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

National Oilwell Varco Inc had a gross margin of 26.99% for the quarter that ended in Dec. 2014 => Competition eroding margins


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.

National Oilwell Varco Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Gross_Profit 9871,7612,8304,0723,7843,8324,4975,3395,1045,809

National Oilwell Varco Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
Gross_Profit 1,3711,3941,2641,1731,3601,4041,3961,4551,5281,541
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