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GuruFocus has detected 2 Warning Signs with Contango Oil & Gas Co $MCF.
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Contango Oil & Gas Co (AMEX:MCF)
Gross Profit
$51.69 Mil (TTM As of Mar. 2017)

Contango Oil & Gas Co's gross profit for the three months ended in Mar. 2017 was $12.59 Mil. Contango Oil & Gas Co's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $51.69 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Contango Oil & Gas Co's gross profit for the three months ended in Mar. 2017 was $12.59 Mil. Contango Oil & Gas Co's revenue for the three months ended in Mar. 2017 was $19.42 Mil. Therefore, Contango Oil & Gas Co's Gross Margin for the quarter that ended in Mar. 2017 was 64.82%.

Contango Oil & Gas Co had a gross margin of 64.82% for the quarter that ended in Mar. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Contango Oil & Gas Co was 88.71%. The lowest was 34.23%. And the median was 76.63%.

Warning Sign:

Contango Oil & Gas Co gross margin has been in long term decline. The average rate of decline per year is -3.4%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Contango Oil & Gas Co's Gross Profit for the fiscal year that ended in Dec. 2016 is calculated as

Gross Profit (A: Dec. 2016 )=Revenue - Cost of Goods Sold
=78.183 - 29.111
=49.07

Contango Oil & Gas Co's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=19.424 - 6.833
=12.59

Contango Oil & Gas Co Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 12.342 (Jun. 2016 ) + 11.418 (Sep. 2016 ) + 15.334 (Dec. 2016 ) + 12.591 (Mar. 2017 ) = $51.69 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Contango Oil & Gas Co's Gross Margin for the quarter that ended in Mar. 2017 is calculated as

Gross Margin (Q: Mar. 2017 )=Gross Profit (Q: Mar. 2017 ) / Revenue (Q: Mar. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=12.59 / 19.424
=64.82 %

* 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

Contango Oil & Gas Co had a gross margin of 64.82% for the quarter that ended in Mar. 2017 => Durable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Contango Oil & Gas Co Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Dec14Dec15Dec16
Gross_Profit 10.87103.35141.16121.47166.28153.7443.55229.2278.6749.07

Contango Oil & Gas Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit 39.4220.7424.3620.0013.579.9812.3411.4215.3312.59
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