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NRG Energy Inc (NYSE:NRG)
Gross Margin
22.20% (As of Jun. 2014)

Gross Margin is calculated as gross profit divided by its revenue. NRG Energy Inc's gross profit for the three months ended in Jun. 2014 was $804 Mil. NRG Energy Inc's revenue for the three months ended in Jun. 2014 was $3,621 Mil. Therefore, NRG Energy Inc's Gross Margin for the quarter that ended in Jun. 2014 was 22.20%.

Warning Sign:

NRG Energy Inc gross margin has been in long term decline. The average rate of decline per year is -10.9%.

NRG' s 10-Year Gross Margin Range
Min: 26.48   Max: 100
Current: 26.47

26.48
100

During the past 13 years, the highest Gross Margin of NRG Energy Inc was 100.00%. The lowest was 26.48%. And the median was 46.02%.

NRG's Gross Marginis ranked lower than
100% of the Companies
in the Global Utilities - Independent Power Producers industry.

( Industry Median: vs. NRG: 26.47 )

NRG Energy Inc had a gross margin of 22.20% for the quarter that ended in Jun. 2014 => Competition eroding margins

The 3-Year average Growth Rate of Gross Margin for NRG Energy Inc was -10.90% per year.


Definition

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

NRG Energy Inc'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 )
=3174 / 11295
=(Revenue - Cost of Goods Sold) / Revenue
=(11295 - 8121) / 11295
=28.10 %

NRG Energy Inc's Gross Margin for the quarter that ended in Jun. 2014 is calculated as

Gross Margin (Q: Jun. 2014 )=Gross Profit (Q: Jun. 2014 ) / Revenue (Q: Jun. 2014 )
=804 / 3621
=(Revenue - Cost of Goods Sold) / Revenue
=(3621 - 2817) / 3621
=22.20 %

* 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

NRG Energy Inc had a gross margin of 22.20% for the quarter that ended in Jun. 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.

NRG Energy Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross Margin 100.00100.00100.00100.0047.7440.5431.3726.4827.1028.10

NRG Energy Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Gross Margin 14.9838.2725.3528.2615.7629.9832.5230.5221.6022.20
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