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GuruFocus has detected 5 Warning Signs with Renewable Energy Group Inc $REGI.
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Renewable Energy Group Inc (NAS:REGI)
Gross Profit
$179 Mil (TTM As of Dec. 2016)

Renewable Energy Group Inc's gross profit for the three months ended in Dec. 2016 was $82 Mil. Renewable Energy Group Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $179 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Renewable Energy Group Inc's gross profit for the three months ended in Dec. 2016 was $82 Mil. Renewable Energy Group Inc's revenue for the three months ended in Dec. 2016 was $560 Mil. Therefore, Renewable Energy Group Inc's Gross Margin for the quarter that ended in Dec. 2016 was 14.62%.

Renewable Energy Group Inc had a gross margin of 14.62% for the quarter that ended in Dec. 2016 => No sustainable competitive advantage

During the past 9 years, the highest Gross Margin of Renewable Energy Group Inc was 15.98%. The lowest was 2.24%. And the median was 8.40%.

Warning Sign:

Renewable Energy Group Inc gross margin has been in long term decline. The average rate of decline per year is -6.4%.


Definition

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

Renewable Energy Group 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
=2041.232 - 1869.716
=172

Renewable Energy Group 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
=560.421 - 478.501
=82

Renewable Energy Group Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 25.108 (Mar. 2016 ) + 24.862 (Jun. 2016 ) + 47.348 (Sep. 2016 ) + 81.92 (Dec. 2016 ) = $179 Mil.

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

Renewable Energy Group 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
=82 / 560.421
=14.62 %

* 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

Renewable Energy Group Inc had a gross margin of 14.62% for the quarter that ended in Dec. 2016 => No sustainable 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.

Renewable Energy Group Inc Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 0232212758239161111172

Renewable Energy Group Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 23111-1616410625254782
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