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Health Management Associates, Inc. (NYSE:HMA)
Gross Margin
38.34% (As of Sep. 2013)

Gross Margin is calculated as gross profit divided by its revenue. Health Management Associates, Inc.'s gross profit for the three months ended in Sep. 2013 was \$545 Mil. Health Management Associates, Inc.'s revenue for the three months ended in Sep. 2013 was \$1,421 Mil. Therefore, Health Management Associates, Inc.'s Gross Margin for the quarter that ended in Sep. 2013 was 38.34%.

Health Management Associates, Inc. had a gross margin of 38.34% for the quarter that ended in Sep. 2013 => Competition eroding margins

The 5-Year average Growth Rate of Gross Margin for Health Management Associates, Inc. was 0.00% per year.

Definition

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

Health Management Associates, Inc.'s Gross Margin for the fiscal year that ended in Dec. 2012 is calculated as

 Gross Margin (A: Dec. 2012 ) = Gross Profit (A: Dec. 2012 ) / Revenue (A: Dec. 2012 ) = 2341.6 / 5865.505 = (Revenue - Cost of Goods Sold) / Revenue = (5865.505 - 3523.864) / 5865.505 = 39.92 %

Health Management Associates, Inc.'s Gross Margin for the quarter that ended in Sep. 2013 is calculated as

 Gross Margin (Q: Sep. 2013 ) = Gross Profit (Q: Sep. 2013 ) / Revenue (Q: Sep. 2013 ) = 544.9 / 1421.243 = (Revenue - Cost of Goods Sold) / Revenue = (1421.243 - 876.361) / 1421.243 = 38.34 %

* 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

Health Management Associates, Inc. had a gross margin of 38.34% for the quarter that ended in Sep. 2013 => 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

Historical Data

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

Health Management Associates, Inc. Annual Data

 Sep03 Sep04 Sep05 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Gross Margin 100.00 31.07 31.06 86.50 86.62 45.23 46.71 46.58 39.45 39.92

Health Management Associates, Inc. Quarterly Data

 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 Mar13 Jun13 Sep13 Gross Margin 40.22 40.16 38.43 39.85 40.70 40.64 38.52 38.07 38.10 38.34
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