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Dick's Sporting Goods Inc (NYSE:DKS)
Operating Income
$544 Mil (TTM As of Apr. 2015)

Dick's Sporting Goods Inc's operating income for the three months ended in Apr. 2015 was $102 Mil. Its operating income for the trailing twelve months (TTM) ended in Apr. 2015 was $544 Mil.

Operating margin is calculated as operating income divided by its revenue. Dick's Sporting Goods Inc's operating income for the three months ended in Apr. 2015 was $102 Mil. Dick's Sporting Goods Inc's revenue for the three months ended in Apr. 2015 was $1,565 Mil. Therefore, Dick's Sporting Goods Inc's operating margin for the quarter that ended in Apr. 2015 was 6.51%.

Good Sign:

Dick's Sporting Goods Inc operating margin is expanding. Margin expansion is usually a good sign.

Dick's Sporting Goods Inc's 3-Year average Growth Rate for operating margin was 10.00% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition. Dick's Sporting Goods Inc's annualized return on capital for the quarter that ended in Apr. 2015 was 14.97%. Dick's Sporting Goods Inc's annualized return on capital (Joel Greenblatt’s) for the quarter that ended in Apr. 2015 was 23.43%.


Definition

Operating income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Dick's Sporting Goods Inc's Operating Income for the fiscal year that ended in Jan. 2015 is calculated as

Operating Income(A: Jan. 2015 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=6814.479-4727.813-1532.607
-Research & Development-Depreciation, Depletion & Amortization-Others
-0-179.431--179.431
=554

Dick's Sporting Goods Inc's Operating Income for the quarter that ended in Apr. 2015 is calculated as

Operating Income(Q: Apr. 2015 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=1565.308-1096.32-367.076
-Research & Development-Depreciation, Depletion & Amortization-Others (1)
-0-42.576--42.576
=102

Operating Income(Q: Apr. 2015 )
=EBITDA-Depreciation, Depletion & Amortization-Others (2)
=146.638-42.576-2.15
=102

Dick's Sporting Goods Inc Operating Income for the trailing twelve months (TTM) ended in Apr. 2015 was 111.562 (Jul. 2014 ) + 79.93 (Oct. 2014 ) + 250.48 (Jan. 2015 ) + 101.912 (Apr. 2015 ) = $544 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition.

Dick's Sporting Goods Inc's annualized Return on Capital (ROC) for the quarter that ended in Apr. 2015 is calculated as:

Return on Capital (ROC)(Q: Apr. 2015 )
=NOPAT/Average Invested Capital
=Oper. Inc.*(1-Tax Rate)/( (Invested Capital (Q: Jan. 2015 ) + Invested Capital (Q: Apr. 2015 ))/2)
=407.648 * ( 1 - 38.75% )/( (1616.996 + 1719.232)/2)
=249.6844/1668.114
=14.97 %

where

Invested Capital(Q: Jan. 2015 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=5.913 + 0.537 + 1832.225 - 221.679
=1616.996

Invested Capital(Q: Apr. 2015 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=56.981 + 0.539 + 1743.121 - 81.409
=1719.232

Note: The Operating Income data used here is four times the quarterly (Apr. 2015) operating income data.

2. Joel Greenblatt’s definition of Return on Capital:

Dick's Sporting Goods Inc's annualized Return on Capital (Joel Greenblatt’s) for the quarter that ended in Apr. 2015 is calculated as:

ROC (Joel Greenblatt’s)(Q: Apr. 2015 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Net PPE+Net Working Capital)
     Q: Jan. 2015  Q: Apr. 2015
=EBIT/( ( (Net PPE + Net Working Capital) + (Net PPE + Net Working Capital) )/2 )
=416.248/( ( (1203.382 + max(510.409, 0)) + (1220.471 + max(619.189, 0)) )/2 )
=416.248/( ( 1713.791 + 1839.66 )/2 )
=416.248/1776.7255
=23.43 %

where Working Capital is:

Working Capital(Q: Jan. 2015 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(80.292 + 1390.767 + 157.646) - (946.037 + 153.477 + 18.782)
=510.409

Working Capital(Q: Apr. 2015 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(63.871 + 1623.753 + 160.076) - (1078.537 + 149.974 + -5.68434188608E-14)
=619.189

When net working capital is negative, 0 is used.

Note: The Earnings Before Interest and Taxes (EBIT) data used here is four times the quarterly (Apr. 2015) EBIT data.

3. Operating Income is also linked to Operating Margin:

Dick's Sporting Goods Inc's Operating Margin for the quarter that ended in Apr. 2015 is calculated as:

Operating Margin=Operating Income (Q: Apr. 2015 )/Total Revenue (Q: Apr. 2015 )
=101.912/1565.308
=6.51 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Be Aware

Compared with a company’s EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company’s revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)’s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia’s Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus’s Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


Related Terms

Revenue, Cost of Goods Sold, Selling, General, & Admin. Expense, Research & Development, Gross Profit, EBITDA, Depreciation, Depletion and Amortization, Return on Capital, Return on Capital (Joel Greenblatt’s), Earnings Yield, Operating Margin, EBIT


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Dick's Sporting Goods Inc Annual Data

Jan06Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15
Operating Income 13319826930226309432524537554

Dick's Sporting Goods Inc Quarterly Data

Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14Jan15Apr15
Operating Income 211981377922311211280250102
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