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GuruFocus has detected 2 Warning Signs with Valero Energy Corp $VLO.
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Valero Energy Corp (NYSE:VLO)
Gross Profit
$5,994 Mil (TTM As of Mar. 2017)

Valero Energy Corp's gross profit for the three months ended in Mar. 2017 was $1,227 Mil. Valero Energy Corp's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was $5,994 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Valero Energy Corp's gross profit for the three months ended in Mar. 2017 was $1,227 Mil. Valero Energy Corp's revenue for the three months ended in Mar. 2017 was $21,772 Mil. Therefore, Valero Energy Corp's Gross Margin for the quarter that ended in Mar. 2017 was 5.64%.

Valero Energy Corp had a gross margin of 5.64% for the quarter that ended in Mar. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Valero Energy Corp was 10.15%. The lowest was 3.46%. And the median was 5.85%.


Definition

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

Valero Energy Corp'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
=75659 - 69422
=6,237

Valero Energy Corp's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

Gross Profit (Q: Mar. 2017 )=Revenue - Cost of Goods Sold
=21772 - 20545
=1,227

Valero Energy Corp Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 1917 (Jun. 2016 ) + 1554 (Sep. 2016 ) + 1296 (Dec. 2016 ) + 1227 (Mar. 2017 ) = $5,994 Mil.

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

Valero Energy Corp'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
=1,227 / 21772
=5.64 %

* 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

Valero Energy Corp had a gross margin of 5.64% 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.

Valero Energy Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Gross_Profit 9,6667,2602,2383,8145,7857,3776,4358,3168,9106,237

Valero Energy Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Gross_Profit 2,4352,0832,6812,8001,3461,4701,9171,5541,2961,227
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