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HP Inc (NYSE:HPQ)
Gross Margin
18.26% (As of Jul. 2016)

Gross Margin is calculated as gross profit divided by its revenue. HP Inc's gross profit for the six months ended in Jul. 2016 was $2,172 Mil. HP Inc's revenue for the six months ended in Jul. 2016 was $11,892 Mil. Therefore, HP Inc's Gross Margin for the quarter that ended in Jul. 2016 was 18.26%.

Warning Sign:

HP Inc gross margin has been in long term decline. The average rate of decline per year is -2.9%.

HPQ' s Gross Margin Range Over the Past 10 Years
Min: 18.65   Max: 24.86
Current: 18.65

18.65
24.86

During the past 13 years, the highest Gross Margin of HP Inc was 24.86%. The lowest was 18.65%. And the median was 23.74%.

HPQ's Gross Margin is ranked lower than
61% of the 2253 Companies
in the Global Computer Systems industry.

( Industry Median: 23.09 vs. HPQ: 18.65 )

HP Inc had a gross margin of 18.26% for the quarter that ended in Jul. 2016 => No sustainable competitive advantage

The 5-Year average Growth Rate of Gross Margin for HP Inc was -2.90% per year.


Definition

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

HP Inc's Gross Margin for the fiscal year that ended in Oct. 2016 is calculated as

Gross Margin (A: Oct. 2016 )=Gross Profit (A: Oct. 2016 ) / Revenue (A: Oct. 2016 )
=8998 / 48238
=(Revenue - Cost of Goods Sold) / Revenue
=(48238 - 39240) / 48238
=18.65 %

HP Inc's Gross Margin for the quarter that ended in Jul. 2016 is calculated as

Gross Margin (Q: Jul. 2016 )=Gross Profit (Q: Jul. 2016 ) / Revenue (Q: Jul. 2016 )
=2172 / 11892
=(Revenue - Cost of Goods Sold) / Revenue
=(11892 - 9720) / 11892
=18.26 %

* 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

HP Inc had a gross margin of 18.26% for the quarter that ended in Jul. 2016 => 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 local exchange's currency.

HP Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
Gross Margin 24.8624.2223.5923.9523.4423.2423.0823.8823.9618.65

HP Inc Semi-Annual Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
Gross Margin 23.9724.5819.3819.7418.8226.7918.6619.4218.2618.31
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