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GuruFocus has detected 2 Warning Signs with TripAdvisor Inc $TRIP.
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TripAdvisor Inc (NAS:TRIP)
Gross Profit
$1,409 Mil (TTM As of Dec. 2016)

TripAdvisor Inc's gross profit for the three months ended in Dec. 2016 was $300 Mil. TripAdvisor Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was $1,409 Mil.

Gross Margin is calculated as gross profit divided by its revenue. TripAdvisor Inc's gross profit for the three months ended in Dec. 2016 was $300 Mil. TripAdvisor Inc's revenue for the three months ended in Dec. 2016 was $316 Mil. Therefore, TripAdvisor Inc's Gross Margin for the quarter that ended in Dec. 2016 was 94.94%.

TripAdvisor Inc had a gross margin of 94.94% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 9 years, the highest Gross Margin of TripAdvisor Inc was 99.19%. The lowest was 95.20%. And the median was 98.29%.


Definition

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

TripAdvisor 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
=1480 - 71
=1,409

TripAdvisor 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
=316 - 16
=300

TripAdvisor Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 336 (Mar. 2016 ) + 371 (Jun. 2016 ) + 402 (Sep. 2016 ) + 300 (Dec. 2016 ) = $1,409 Mil.

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

TripAdvisor 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
=300 / 316
=94.94 %

* 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

TripAdvisor Inc had a gross margin of 94.94% for the quarter that ended in Dec. 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.

TripAdvisor Inc Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 02963484776267519271,2061,4341,409

TripAdvisor Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 343276350389399297336371402300
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