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GuruFocus has detected 5 Warning Signs with NorthWestern Corp $NWE.
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NorthWestern Corp (NYSE:NWE)
Gross Profit
$856 Mil (TTM As of Dec. 2016)

NorthWestern Corp's gross profit for the three months ended in Dec. 2016 was $223 Mil. NorthWestern Corp's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $856 Mil.

Gross Margin is calculated as gross profit divided by its revenue. NorthWestern Corp's gross profit for the three months ended in Dec. 2016 was $223 Mil. NorthWestern Corp's revenue for the three months ended in Dec. 2016 was $331 Mil. Therefore, NorthWestern Corp's Gross Margin for the quarter that ended in Dec. 2016 was 67.42%.

NorthWestern Corp had a gross margin of 67.42% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of NorthWestern Corp was 100.00%. The lowest was 44.58%. And the median was 59.21%.


Definition

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

NorthWestern 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
=1257.247 - 400.973
=856

NorthWestern 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
=330.59 - 107.69
=223

NorthWestern Corp Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 217.105 (Mar. 2016 ) + 211.427 (Jun. 2016 ) + 204.842 (Sep. 2016 ) + 222.9 (Dec. 2016 ) = $856 Mil.

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

NorthWestern 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
=223 / 330.59
=67.42 %

* 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

NorthWestern Corp had a gross margin of 67.42% for the quarter that ended in Dec. 2016 => Durable 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 local exchange's currency.

NorthWestern Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 1,200562568580623675675722841856

NorthWestern Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 157205234191199218217211205223
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