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CVS Caremark Corp (NYSE:CVS)
Gross Margin
19.31% (As of Dec. 2013)

Gross Margin is calculated as gross profit divided by its revenue. CVS Caremark Corp's gross profit for the three months ended in Dec. 2013 was $6,331 Mil. CVS Caremark Corp's revenue for the three months ended in Dec. 2013 was $32,782 Mil. Therefore, CVS Caremark Corp's Gross Margin for the quarter that ended in Dec. 2013 was 19.31%.

Warning Sign:

CVS Caremark Corp gross margin has been in long term decline. The average rate of decline per year is -2.9%.

CVS' s 10-Year Gross Margin Range
Min: 18.27   Max: 35.74
Current: 18.76

18.27
35.74

During the past 13 years, the highest Gross Margin of CVS Caremark Corp was 35.74%. The lowest was 18.27%. And the median was 26.01%.

CVS's Gross Marginis ranked lower than
100% of the Companies
in the Global Pharmaceutical Retailers industry.

( Industry Median: vs. CVS: 18.76 )

CVS Caremark Corp had a gross margin of 19.31% for the quarter that ended in Dec. 2013 => No sustainable competitive advantage

The 3-Year average Growth Rate of Gross Margin for CVS Caremark Corp was -2.90% per year.


Definition

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

CVS Caremark Corp's Gross Margin for the fiscal year that ended in Dec. 2013 is calculated as

Gross Margin (A: Dec. 2013 )=Gross Profit (A: Dec. 2013 ) / Revenue (A: Dec. 2013 )
=23783 / 126761
=(Revenue - Cost of Goods Sold) / Revenue
=(126761 - 102978) / 126761
=18.76 %

CVS Caremark Corp's Gross Margin for the quarter that ended in Dec. 2013 is calculated as

Gross Margin (Q: Dec. 2013 )=Gross Profit (Q: Dec. 2013 ) / Revenue (Q: Dec. 2013 )
=6331 / 32782
=(Revenue - Cost of Goods Sold) / Revenue
=(32782 - 26451) / 32782
=19.31 %

* 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

CVS Caremark Corp had a gross margin of 19.31% for the quarter that ended in Dec. 2013 => No sustainable competitive advantage


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.

CVS Caremark Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross Margin 26.2526.2026.8021.1020.9120.7321.1119.2018.2718.76

CVS Caremark Corp Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Gross Margin 19.4119.6216.6017.7418.6820.0118.1518.6818.8819.31
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