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GuruFocus has detected 6 Warning Signs with National Grid PLC $NGG.
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National Grid PLC (NYSE:NGG)
Gross Profit
$3,960 Mil (TTM As of Mar. 2017)

National Grid PLC's gross profit for the six months ended in Mar. 2017 was $1,751 Mil. National Grid PLC's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $3,960 Mil.

Gross Margin is calculated as gross profit divided by its revenue. National Grid PLC's gross profit for the six months ended in Mar. 2017 was $1,751 Mil. National Grid PLC's revenue for the six months ended in Mar. 2017 was $9,669 Mil. Therefore, National Grid PLC's Gross Margin for the quarter that ended in Mar. 2017 was 18.11%.

National Grid PLC had a gross margin of 18.11% for the quarter that ended in Mar. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of National Grid PLC was 44.03%. The lowest was 21.34%. And the median was 25.84%.

Warning Sign:

National Grid PLC gross margin has been in long term decline. The average rate of decline per year is -2.3%.


Definition

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

National Grid PLC's Gross Profit for the fiscal year that ended in Mar. 2017 is calculated as

Gross Profit (A: Mar. 2017 )=Revenue - Cost of Goods Sold
=18561.7283951 - 14601.2345679
=3,960

National Grid PLC's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=9669.13580247 - 7918.51851852
=1,751

For company reported semi-annually, GuruFocus uses latest annual data as the TTM data. National Grid PLC Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was $3,960 Mil.

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

National Grid PLC'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
=1,751 / 9669.13580247
=18.11 %

* 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

National Grid PLC had a gross margin of 18.11% for the quarter that ended in Mar. 2017 => No sustainable 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.

National Grid PLC Annual Data

Mar08Mar09Mar10Mar11Mar12Mar13Mar14Mar15Mar16Mar17
Gross_Profit 10,1247,3644,9596,0505,5935,6556,2045,6505,8193,960

National Grid PLC Semi-Annual Data

Sep12Mar13Sep13Mar14Sep14Mar15Sep15Mar16Sep16Mar17
Gross_Profit 2,8063,0302,4373,6542,6643,2052,8363,1852,3521,751
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