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GuruFocus has detected 5 Warning Signs with Royal Dutch Shell PLC \$RDS.A.
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Royal Dutch Shell PLC (NYSE:RDS.A)
Gross Profit
\$49,025 Mil (TTM As of Dec. 2016)

Royal Dutch Shell PLC's gross profit for the three months ended in Dec. 2016 was \$14,861 Mil. Royal Dutch Shell PLC's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was \$49,025 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Royal Dutch Shell PLC's gross profit for the three months ended in Dec. 2016 was \$14,861 Mil. Royal Dutch Shell PLC's revenue for the three months ended in Dec. 2016 was \$67,092 Mil. Therefore, Royal Dutch Shell PLC's Gross Margin for the quarter that ended in Dec. 2016 was 22.15%.

Royal Dutch Shell PLC had a gross margin of 22.15% for the quarter that ended in Dec. 2016 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Royal Dutch Shell PLC was 20.42%. The lowest was 16.61%. And the median was 17.97%.

Definition

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

Royal Dutch Shell PLC'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 = 240033 - 191008 = 49,025

Royal Dutch Shell PLC's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

 Gross Profit (Q: Dec. 2016 ) = Revenue - Cost of Goods Sold = 67092 - 52231 = 14,861

Royal Dutch Shell PLC Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 9681 (Mar. 2016 ) + 11833 (Jun. 2016 ) + 12650 (Sep. 2016 ) + 14861 (Dec. 2016 ) = \$49,025 Mil.

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

Royal Dutch Shell PLC'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 = 14,861 / 67092 = 22.15 %

* 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

Royal Dutch Shell PLC had a gross margin of 22.15% for the quarter that ended in Dec. 2016 => Competition eroding margins

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.

Royal Dutch Shell PLC Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 59,085 83,793 54,575 70,518 87,892 85,760 78,014 74,028 49,417 49,025

Royal Dutch Shell PLC Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 17,763 13,061 14,766 15,003 10,153 9,495 9,681 11,833 12,650 14,861
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