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GuruFocus has detected 4 Warning Signs with Overstock.com Inc \$OSTK.
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Overstock.com Inc (NAS:OSTK)
Gross Profit
\$331 Mil (TTM As of Dec. 2016)

Overstock.com Inc's gross profit for the three months ended in Dec. 2016 was \$98 Mil. Overstock.com Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$331 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Overstock.com Inc's gross profit for the three months ended in Dec. 2016 was \$98 Mil. Overstock.com Inc's revenue for the three months ended in Dec. 2016 was \$526 Mil. Therefore, Overstock.com Inc's Gross Margin for the quarter that ended in Dec. 2016 was 18.63%.

Overstock.com Inc had a gross margin of 18.63% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Overstock.com Inc was 18.99%. The lowest was 16.78%. And the median was 18.22%.

Definition

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

Overstock.com Inc'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 = 1799.963 - 1468.614 = 331

Overstock.com Inc's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 526.182 - 428.178 = 98

Overstock.com Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 77.307 (Mar. 2016 ) + 76.322 (Jun. 2016 ) + 79.716 (Sep. 2016 ) + 98.004 (Dec. 2016 ) = \$331 Mil.

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

Overstock.com Inc'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 = 98 / 526.182 = 18.63 %

* 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

Overstock.com Inc had a gross margin of 18.63% 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.

Overstock.com Inc Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 128 144 165 190 179 198 248 279 305 331

Overstock.com Inc Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 67 85 75 74 72 83 77 76 80 98
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