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GuruFocus has detected 3 Warning Signs with Fortune Brands Home & Security Inc $FBHS.
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Fortune Brands Home & Security Inc (NYSE:FBHS)
Gross Profit
$1,844 Mil (TTM As of Mar. 2017)

Fortune Brands Home & Security Inc's gross profit for the three months ended in Mar. 2017 was $417 Mil. Fortune Brands Home & Security Inc's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $1,844 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Fortune Brands Home & Security Inc's gross profit for the three months ended in Mar. 2017 was $417 Mil. Fortune Brands Home & Security Inc's revenue for the three months ended in Mar. 2017 was $1,187 Mil. Therefore, Fortune Brands Home & Security Inc's Gross Margin for the quarter that ended in Mar. 2017 was 35.14%.

Fortune Brands Home & Security Inc had a gross margin of 35.14% for the quarter that ended in Mar. 2017 => Competition eroding margins

During the past 8 years, the highest Gross Margin of Fortune Brands Home & Security Inc was 36.40%. The lowest was 29.94%. And the median was 33.65%.


Definition

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

Fortune Brands Home & Security Inc'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
=4984.9 - 3180.3
=1,805

Fortune Brands Home & Security Inc's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=1186.8 - 769.8
=417

Fortune Brands Home & Security Inc Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 474.7 (Jun. 2016 ) + 478 (Sep. 2016 ) + 474.1 (Dec. 2016 ) + 417 (Mar. 2017 ) = $1,844 Mil.

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

Fortune Brands Home & Security Inc'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
=417 / 1186.8
=35.14 %

* 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

Fortune Brands Home & Security Inc had a gross margin of 35.14% for the quarter that ended in Mar. 2017 => Competition eroding margins


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.

Fortune Brands Home & Security Inc Annual Data

Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 009031,0569971,0421,2951,3671,5821,805

Fortune Brands Home & Security Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit 342317410435420378475478474417
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