A high gross margin is one of the most reliable indicators that a company is able to sell its products for significantly more than it costs to manufacture them or provide the service. Furthermore, if it remains above 60% over the long term, this usually indicates strong pricing power, a strong brand, or a structural advantage that competitors find difficult to replicate. We took a look at five established U.S. companies for which a high gross margin is at the core of their entire business model.

Gross margin measures how much a company retains from every dollar of revenue after deducting the direct costs of producing goods or providing services. It is therefore one of the first—and best—indicators of profitability. While net income is affected by taxes, interest, one-time items, and investments in development, gross margin reflects the very essence of the business—namely, whether the company is selling something the market is willing to pay for.

Investor Warren Buffett has long pointed…