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GuruFocus has detected 5 Warning Signs with Telefonica SA \$TEF.
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Telefonica SA (NYSE:TEF)
Gross Profit
\$42,203 Mil (TTM As of Sep. 2016)

Telefonica SA's gross profit for the three months ended in Sep. 2016 was \$10,778 Mil. Telefonica SA's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was \$42,203 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Telefonica SA's gross profit for the three months ended in Sep. 2016 was \$10,778 Mil. Telefonica SA's revenue for the three months ended in Sep. 2016 was \$14,914 Mil. Therefore, Telefonica SA's Gross Margin for the quarter that ended in Sep. 2016 was 72.27%.

Telefonica SA had a gross margin of 72.27% for the quarter that ended in Sep. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Telefonica SA was 76.56%. The lowest was 70.21%. And the median was 71.63%.

Definition

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

Telefonica SA'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 = 54890.2953586 - 16078.0590717 = 38,812

Telefonica SA's Gross Profit for the quarter that ended in Sep. 2016 is calculated as

 Gross Profit (Q: Sep. 2016 ) = Revenue - Cost of Goods Sold = 14913.5802469 - 4135.80246914 = 10,778

Telefonica SA Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was 10677.5599129 (Dec. 2015 ) + 8984.40979955 (Mar. 2016 ) + 11762.9213483 (Jun. 2016 ) + 10777.7777778 (Sep. 2016 ) = \$42,203 Mil.

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

Telefonica SA'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 = 10,778 / 14913.5802469 = 72.27 %

* 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

Telefonica SA had a gross margin of 72.27% for the quarter that ended in Sep. 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.

Telefonica SA Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 62,297 56,747 60,727 64,815 61,432 61,161 57,141 45,502 39,379 40,672

Telefonica SA Quarterly Data

 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Gross_Profit 12,088 11,700 9,367 9,912 9,945 10,678 8,984 11,763 10,778 11,302
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