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Nexen, Inc. (NYSE:NXY)
Gross Margin
7.25% (As of Dec. 2012)

Gross Margin is calculated as gross profit divided by its revenue. Nexen, Inc.'s gross profit for the three months ended in Dec. 2012 was \$124 Mil. Nexen, Inc.'s revenue for the three months ended in Dec. 2012 was \$1,713 Mil. Therefore, Nexen, Inc.'s Gross Margin for the quarter that ended in Dec. 2012 was 7.25%.

Nexen, Inc. had a gross margin of 100.00% for the quarter that ended in Dec. 2012 => Durable competitive advantage

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

Definition

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

Nexen, 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 ) = 6778.8 / 6778.78787879 = (Revenue - Cost of Goods Sold) / Revenue = (6778.78787879 - 0) / 6778.78787879 = 100.00 %

Nexen, Inc.'s Gross Margin for the quarter that ended in Dec. 2012 is calculated as

 Gross Margin (Q: Dec. 2012 ) = Gross Profit (Q: Dec. 2012 ) / Revenue (Q: Dec. 2012 ) = 1713.1 / 1713.13131313 = (Revenue - Cost of Goods Sold) / Revenue = (1713.13131313 - 0) / 1713.13131313 = 100.00 %

* 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

Nexen, Inc. had a gross margin of 100.00% for the quarter that ended in Dec. 2012 => Durable 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

Historical Data

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

Nexen, Inc. Annual Data

 Dec03 Dec04 Dec05 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Gross Margin 59.87 74.19 76.32 75.54 77.43 88.26 86.30 90.28 93.43 71.30

Nexen, Inc. Quarterly Data

 Sep10 Dec10 Mar11 Jun11 Sep11 Dec11 Mar12 Jun12 Sep12 Dec12 Gross Margin 90.86 94.61 95.92 93.01 92.78 91.97 93.05 94.12 91.52 7.25
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