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GuruFocus has detected 1 Warning Sign with PPG Industries Inc $PPG.
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PPG Industries Inc (NYSE:PPG)
Gross Profit
$6,975 Mil (TTM As of Sep. 2016)

PPG Industries Inc's gross profit for the three months ended in Sep. 2016 was $1,708 Mil. PPG Industries Inc's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was $6,975 Mil.

Gross Margin is calculated as gross profit divided by its revenue. PPG Industries Inc's gross profit for the three months ended in Sep. 2016 was $1,708 Mil. PPG Industries Inc's revenue for the three months ended in Sep. 2016 was $3,789 Mil. Therefore, PPG Industries Inc's Gross Margin for the quarter that ended in Sep. 2016 was 45.08%.

PPG Industries Inc had a gross margin of 45.08% for the quarter that ended in Sep. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of PPG Industries Inc was 44.59%. The lowest was 35.93%. And the median was 39.46%.


Definition

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

PPG Industries Inc's Gross Profit for the fiscal year that ended in Dec. 2015 is calculated as

Gross Profit (A: Dec. 2015 )=Revenue - Cost of Goods Sold
=15330 - 8591
=6,739

PPG Industries Inc's Gross Profit for the quarter that ended in Sep. 2016 is calculated as

Gross Profit (Q: Sep. 2016 )=Revenue - Cost of Goods Sold
=3789 - 2081
=1,708

PPG Industries Inc Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was 1734 (Dec. 2015 ) + 1659 (Mar. 2016 ) + 1874 (Jun. 2016 ) + 1708 (Sep. 2016 ) = $6,975 Mil.

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

PPG Industries Inc's Gross Margin for the quarter that ended in Sep. 2016 is calculated as

Gross Margin (Q: Sep. 2016 )=Gross Profit (Q: Sep. 2016 ) / Revenue (Q: Sep. 2016 )
=(Revenue - Cost of Goods Sold) / Revenue
=1,708 / 3789
=45.08 %

* 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

PPG Industries Inc had a gross margin of 45.08% for the quarter that ended in Sep. 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.

PPG Industries Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross_Profit 3,7084,3925,6944,7005,2095,2885,0875,9516,5696,739

PPG Industries Inc Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
Gross_Profit 1,7761,7061,5421,5971,8171,6761,7341,6591,8741,708
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