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GuruFocus has detected 4 Warning Signs with Sherwin-Williams Co $SHW.
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Sherwin-Williams Co (NYSE:SHW)
Gross Profit
$6,004 Mil (TTM As of Mar. 2017)

Sherwin-Williams Co's gross profit for the three months ended in Mar. 2017 was $1,343 Mil. Sherwin-Williams Co's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $6,004 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Sherwin-Williams Co's gross profit for the three months ended in Mar. 2017 was $1,343 Mil. Sherwin-Williams Co's revenue for the three months ended in Mar. 2017 was $2,761 Mil. Therefore, Sherwin-Williams Co's Gross Margin for the quarter that ended in Mar. 2017 was 48.64%.

Sherwin-Williams Co had a gross margin of 48.64% for the quarter that ended in Mar. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Sherwin-Williams Co was 49.95%. The lowest was 42.72%. And the median was 45.14%.


Definition

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

Sherwin-Williams Co'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
=11855.602 - 5933.337
=5,922

Sherwin-Williams Co's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=2761.387 - 1418.247
=1,343

Sherwin-Williams Co Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 1635.793 (Jun. 2016 ) + 1636.289 (Sep. 2016 ) + 1388.438 (Dec. 2016 ) + 1343.14 (Mar. 2017 ) = $6,004 Mil.

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

Sherwin-Williams Co's Gross Margin for the quarter that ended in Mar. 2017 is calculated as

Gross Margin (Q: Mar. 2017 )=Gross Profit (Q: Mar. 2017 ) / Revenue (Q: Mar. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=1,343 / 2761.387
=48.64 %

* 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

Sherwin-Williams Co had a gross margin of 48.64% for the quarter that ended in Mar. 2017 => 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.

Sherwin-Williams Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 3,5993,4993,2633,4813,7454,2064,6175,1645,5595,922

Sherwin-Williams Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit 1,2181,1321,5301,5751,3221,2621,6361,6361,3881,343
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