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Watsco Inc (NYSE:WSO)
Gross Margin
25.25% (As of Mar. 2015)

Gross Margin is calculated as gross profit divided by its revenue. Watsco Inc's gross profit for the three months ended in Mar. 2015 was $204 Mil. Watsco Inc's revenue for the three months ended in Mar. 2015 was $809 Mil. Therefore, Watsco Inc's Gross Margin for the quarter that ended in Mar. 2015 was 25.25%.

WSO' s 10-Year Gross Margin Range
Min: 22.44   Max: 26
Current: 24.37

22.44
26

During the past 13 years, the highest Gross Margin of Watsco Inc was 26.00%. The lowest was 22.44%. And the median was 24.25%.

WSO's Gross Marginis ranked lower than
100% of the Companies
in the Global Electronics Distribution industry.

( Industry Median: vs. WSO: 24.37 )

Watsco Inc had a gross margin of 25.25% for the quarter that ended in Mar. 2015 => Competition eroding margins

The 3-Year average Growth Rate of Gross Margin for Watsco Inc was 0.20% per year.


Definition

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

Watsco Inc'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 )
=956.4 / 3944.54
=(Revenue - Cost of Goods Sold) / Revenue
=(3944.54 - 2988.138) / 3944.54
=24.25 %

Watsco Inc's Gross Margin for the quarter that ended in Mar. 2015 is calculated as

Gross Margin (Q: Mar. 2015 )=Gross Profit (Q: Mar. 2015 ) / Revenue (Q: Mar. 2015 )
=204.2 / 808.972
=(Revenue - Cost of Goods Sold) / Revenue
=(808.972 - 604.747) / 808.972
=25.25 %

* 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

Watsco Inc had a gross margin of 25.25% for the quarter that ended in Mar. 2015 => 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.

Watsco Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Gross Margin 25.2425.8225.4326.0024.0223.6724.4623.7324.0224.25

Watsco Inc Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
Gross Margin 23.8824.5823.8023.9024.0024.6623.8724.2124.4425.25
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