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Honda Motor Co Ltd (NYSE:HMC)
Gross Margin
26.88% (As of Dec. 2013)

Gross Margin is calculated as gross profit divided by its revenue. Honda Motor Co Ltd's gross profit for the three months ended in Dec. 2013 was $7,826 Mil. Honda Motor Co Ltd's revenue for the three months ended in Dec. 2013 was $29,114 Mil. Therefore, Honda Motor Co Ltd's Gross Margin for the quarter that ended in Dec. 2013 was 26.88%.

Warning Sign:

Honda Motor Co Ltd gross margin has been in long term decline. The average rate of decline per year is -1.6%.

HMC' s 10-Year Gross Margin Range
Min: 25.23   Max: 35.13
Current: 25.64

25.23
35.13

During the past 13 years, the highest Gross Margin of Honda Motor Co Ltd was 35.13%. The lowest was 25.23%. And the median was 30.17%.

HMC's Gross Marginis ranked lower than
100% of the Companies
in the Global Auto Manufacturers industry.

( Industry Median: vs. HMC: 25.64 )

Honda Motor Co Ltd had a gross margin of 26.88% for the quarter that ended in Dec. 2013 => Competition eroding margins

The 3-Year average Growth Rate of Gross Margin for Honda Motor Co Ltd was -1.60% per year.


Definition

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

Honda Motor Co Ltd's Gross Margin for the fiscal year that ended in Mar. 2013 is calculated as

Gross Margin (A: Mar. 2013 )=Gross Profit (A: Mar. 2013 ) / Revenue (A: Mar. 2013 )
=25908.7 / 101044.896581
=(Revenue - Cost of Goods Sold) / Revenue
=(101044.896581 - 75136.1729986) / 101044.896581
=25.64 %

Honda Motor Co Ltd'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 )
=7826.1 / 29113.915633
=(Revenue - Cost of Goods Sold) / Revenue
=(29113.915633 - 21287.8249053) / 29113.915633
=26.88 %

* 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

Honda Motor Co Ltd had a gross margin of 26.88% for the quarter that ended in Dec. 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

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.

Honda Motor Co Ltd Annual Data

Mar04Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13
Gross Margin 31.2730.2029.2529.0628.8225.8925.2327.3025.5225.64

Honda Motor Co Ltd Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Gross Margin 25.4625.5426.0826.4725.0325.7725.3025.0425.5826.88
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