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GuruFocus has detected 6 Warning Signs with Procter & Gamble Co \$PG.
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Procter & Gamble Co (NYSE:PG)
Gross Profit
\$32,534 Mil (TTM As of Dec. 2016)

Procter & Gamble Co's gross profit for the three months ended in Dec. 2016 was \$8,558 Mil. Procter & Gamble Co's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$32,534 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Procter & Gamble Co's gross profit for the three months ended in Dec. 2016 was \$8,558 Mil. Procter & Gamble Co's revenue for the three months ended in Dec. 2016 was \$16,856 Mil. Therefore, Procter & Gamble Co's Gross Margin for the quarter that ended in Dec. 2016 was 50.77%.

Procter & Gamble Co had a gross margin of 50.77% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Procter & Gamble Co was 52.03%. The lowest was 47.54%. And the median was 49.84%.

Definition

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

Procter & Gamble Co's Gross Profit for the fiscal year that ended in Jun. 2016 is calculated as

 Gross Profit (A: Jun. 2016 ) = Revenue - Cost of Goods Sold = 65299 - 32909 = 32,390

Procter & Gamble Co's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 16856 - 8298 = 8,558

Procter & Gamble Co Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 7840 (Mar. 2016 ) + 7720 (Jun. 2016 ) + 8416 (Sep. 2016 ) + 8558 (Dec. 2016 ) = \$32,534 Mil.

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

Procter & Gamble Co'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 = 8,558 / 16856 = 50.77 %

* 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

Procter & Gamble Co had a gross margin of 50.77% for the quarter that ended in Dec. 2016 => Durable 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.

Procter & Gamble Co Annual Data

 Jun07 Jun08 Jun09 Jun10 Jun11 Jun12 Jun13 Jun14 Jun15 Jun16 Gross_Profit 39,790 42,212 38,004 41,019 41,245 40,595 40,125 35,371 33,693 32,390

Procter & Gamble Co Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 9,037 8,937 8,003 7,716 8,375 8,455 7,840 7,720 8,416 8,558
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