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GuruFocus has detected 10 Warning Signs with HCP Inc $HCP.
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HCP Inc (NYSE:HCP)
Gross Profit
$1,260 Mil (TTM As of Mar. 2017)

HCP Inc's gross profit for the three months ended in Mar. 2017 was $333 Mil. HCP Inc's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $1,260 Mil.

Gross Margin is calculated as gross profit divided by its revenue. HCP Inc's gross profit for the three months ended in Mar. 2017 was $333 Mil. HCP Inc's revenue for the three months ended in Mar. 2017 was $492 Mil. Therefore, HCP Inc's Gross Margin for the quarter that ended in Mar. 2017 was 67.68%.

HCP Inc had a gross margin of 67.68% for the quarter that ended in Mar. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of HCP Inc was 87.09%. The lowest was 63.63%. And the median was 83.15%.

Warning Sign:

HCP Inc gross margin has been in long term decline. The average rate of decline per year is -6.1%.


Definition

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

HCP 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
=2129.294 - 738.399
=1,391

HCP 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
=492.168 - 159.081
=333

HCP Inc Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 482.051 (Jun. 2016 ) + 465.523 (Sep. 2016 ) + -20.334 (Dec. 2016 ) + 333.087 (Mar. 2017 ) = $1,260 Mil.

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

HCP 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
=333 / 492.168
=67.68 %

* 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

HCP Inc had a gross margin of 67.68% 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.

HCP Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 7329609631,0301,4761,5991,8021,2561,3301,391

HCP Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit -153479471484-103345482466-20333
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