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GuruFocus has detected 5 Warning Signs with Frontline Ltd $OSTO:FROO.
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Frontline Ltd (OSTO:FROo)
Gross Profit
NOK3,402 Mil (TTM As of Dec. 2016)

Frontline Ltd's gross profit for the three months ended in Dec. 2016 was NOK629 Mil. Frontline Ltd's gross profit for the trailing twelve months (TTM) ended in Dec. 2016 was NOK3,402 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Frontline Ltd's gross profit for the three months ended in Dec. 2016 was NOK629 Mil. Frontline Ltd's revenue for the three months ended in Dec. 2016 was NOK1,526 Mil. Therefore, Frontline Ltd's Gross Margin for the quarter that ended in Dec. 2016 was 41.23%.

Frontline Ltd had a gross margin of 41.23% for the quarter that ended in Dec. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Frontline Ltd was 64.12%. The lowest was 26.40%. And the median was 47.04%.


Definition

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

Frontline Ltd'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
=6458.09931507 - 2988.03082192
=3,470

Frontline Ltd's Gross Profit for the quarter that ended in Dec. 2016 is calculated as

Gross Profit (Q: Dec. 2016 )=Revenue - Cost of Goods Sold
=1526.45547945 - 897.037671233
=629

Frontline Ltd Gross Profit for the trailing twelve months (TTM) ended in Dec. 2016 was 1254.81355932 (Mar. 2016 ) + 908.920265781 (Jun. 2016 ) + 608.901639344 (Sep. 2016 ) + 629.417808219 (Dec. 2016 ) = NOK3,402 Mil.

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

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

Gross Margin (Q: Dec. 2016 )=Gross Profit (Q: Dec. 2016 ) / Revenue (Q: Dec. 2016 )
=(Revenue - Cost of Goods Sold) / Revenue
=629 / 1526.45547945
=41.23 %

* 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

Frontline Ltd had a gross margin of 41.23% for the quarter that ended in Dec. 2016 => 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.

Frontline Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 4,46910,1083,0063,3051,2218572306442,1003,470

Frontline Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Gross_Profit 261-3103903984078061,255909609629
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