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Schlumberger Ltd (NYSE:SLB)
Gross Margin
12.51% (As of Jun. 2016)

Gross Margin is calculated as gross profit divided by its revenue. Schlumberger Ltd's gross profit for the three months ended in Jun. 2016 was $903 Mil. Schlumberger Ltd's revenue for the three months ended in Jun. 2016 was $7,218 Mil. Therefore, Schlumberger Ltd's Gross Margin for the quarter that ended in Jun. 2016 was 12.51%.

Warning Sign:

Schlumberger Ltd gross margin has been in long term decline. The average rate of decline per year is -1.3%.

SLB' s Gross Margin Range Over the Past 10 Years
Min: 20.54   Max: 34.7
Current: 17.5

20.54
34.7

During the past 13 years, the highest Gross Margin of Schlumberger Ltd was 34.70%. The lowest was 20.54%. And the median was 25.30%.

SLB's Gross Margin is ranked lower than
65% of the 255 Companies
in the Global Oil & Gas Equipment & Services industry.

( Industry Median: 26.27 vs. SLB: 17.50 )

Schlumberger Ltd had a gross margin of 12.51% for the quarter that ended in Jun. 2016 => No sustainable competitive advantage

The 5-Year average Growth Rate of Gross Margin for Schlumberger Ltd was -1.30% per year.


Definition

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

Schlumberger Ltd's Gross Margin for the fiscal year that ended in Dec. 2014 is calculated as

Gross Margin (A: Dec. 2014 )=Gross Profit (A: Dec. 2014 ) / Revenue (A: Dec. 2014 )
=11473 / 48871
=(Revenue - Cost of Goods Sold) / Revenue
=(48871 - 37398) / 48871
=23.48 %

Schlumberger Ltd's Gross Margin for the quarter that ended in Jun. 2016 is calculated as

Gross Margin (Q: Jun. 2016 )=Gross Profit (Q: Jun. 2016 ) / Revenue (Q: Jun. 2016 )
=903 / 7218
=(Revenue - Cost of Goods Sold) / Revenue
=(7218 - 6315) / 7218
=12.51 %

* 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

Schlumberger Ltd had a gross margin of 12.51% for the quarter that ended in Jun. 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 own currency.

Schlumberger Ltd Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross Margin 31.2934.7031.2524.9425.6920.5421.8923.9523.4820.69

Schlumberger Ltd Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
Gross Margin 22.7123.5123.8623.7721.3821.2120.3219.5816.8312.51
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