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Cal-Maine Foods, Inc. (NAS:CALM)
Gross Margin
23.23% (As of Feb. 2014)

Gross Margin is calculated as gross profit divided by its revenue. Cal-Maine Foods, Inc.'s gross profit for the three months ended in Feb. 2014 was $92 Mil. Cal-Maine Foods, Inc.'s revenue for the three months ended in Feb. 2014 was $396 Mil. Therefore, Cal-Maine Foods, Inc.'s Gross Margin for the quarter that ended in Feb. 2014 was 23.23%.

Warning Sign:

Cal-Maine Foods, Inc. gross margin has been in long term decline. The average rate of decline per year is -10.9%.

CALM' s 10-Year Gross Margin Range
Min: 9.44   Max: 32.6
Current: 16.66

9.44
32.6

During the past 13 years, the highest Gross Margin of Cal-Maine Foods, Inc. was 32.60%. The lowest was 9.44%. And the median was 19.15%.

CALM's Gross Marginis ranked lower than
100% of the Companies
in the Global Packaged Foods industry.

( Industry Median: vs. CALM: 16.66 )

Cal-Maine Foods, Inc. had a gross margin of 23.23% for the quarter that ended in Feb. 2014 => Competition eroding margins

The 3-Year average Growth Rate of Gross Margin for Cal-Maine Foods, Inc. was -10.90% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

Cal-Maine Foods, Inc.'s Gross Margin for the fiscal year that ended in May. 2013 is calculated as

Gross Margin (A: May. 2013 )=Gross Profit (A: May. 2013 ) / Revenue (A: May. 2013 )
=214.5 / 1288.104
=(Revenue - Cost of Goods Sold) / Revenue
=(1288.104 - 1073.555) / 1288.104
=16.66 %

Cal-Maine Foods, Inc.'s Gross Margin for the quarter that ended in Feb. 2014 is calculated as

Gross Margin (Q: Feb. 2014 )=Gross Profit (Q: Feb. 2014 ) / Revenue (Q: Feb. 2014 )
=91.9 / 395.522
=(Revenue - Cost of Goods Sold) / Revenue
=(395.522 - 303.627) / 395.522
=23.23 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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

Cal-Maine Foods, Inc. had a gross margin of 23.23% for the quarter that ended in Feb. 2014 => Competition eroding margins


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Cal-Maine Foods, Inc. Annual Data

May04May05May06May07May08May09May10May11May12May13
Gross Margin 30.699.4413.0319.8332.6022.0421.3919.6318.1316.66

Cal-Maine Foods, Inc. Quarterly Data

Nov11Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14
Gross Margin 21.1821.4515.0216.3815.6018.6015.8014.0621.0823.23
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