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Seagate Technology PLC (NAS:STX)
Operating Income
$1,776 Mil (TTM As of Jun. 2014)

Seagate Technology PLC's operating income for the three months ended in Jun. 2014 was $410 Mil. Its operating income for the trailing twelve months (TTM) ended in Jun. 2014 was $1,776 Mil.

Operating margin is calculated as operating income divided by its revenue. Seagate Technology PLC's operating income for the three months ended in Jun. 2014 was $410 Mil. Seagate Technology PLC's revenue for the three months ended in Jun. 2014 was $3,301 Mil. Therefore, Seagate Technology PLC's operating margin for the quarter that ended in Jun. 2014 was 12.42%.

Seagate Technology PLC's 3-Year average Growth Rate for operating margin was 0.00% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition. Seagate Technology PLC's annualized return on capital for the quarter that ended in Jun. 2014 was 15.38%. Seagate Technology PLC's annualized return on capital (Joel Greenblatt’s) for the quarter that ended in Jun. 2014 was 57.32%.

Operating income is also linked to Joel Greenblatt’s definition of earnings yield. Seagate Technology PLC's earnings yield (Joel Greenblatt’s) for the quarter that ended in Jun. 2014 was 8.95%.


Definition

Operating income, sometimes also called Earnings Before Interest and Taxes (EBIT), 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.

Seagate Technology PLC's Operating Income for the fiscal year that ended in Jun. 2014 is calculated as

Operating Income (EBIT)(A: Jun. 2014 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=13724-9878-722
-Research & Development-Depreciation, Depletion & Amortization-Others
-1226-879--757
=1,776

Seagate Technology PLC's Operating Income for the quarter that ended in Jun. 2014 is calculated as

Operating Income (EBIT)(Q: Jun. 2014 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=3301-2376-161
-Research & Development-Depreciation, Depletion & Amortization-Others (1)
-323-211--180
=410

Operating Income (EBIT)(Q: Jun. 2014 )
=EBITDA-Depreciation, Depletion & Amortization-Others (2)
=545-211--76
=410

Seagate Technology PLC Operating Income for the trailing twelve months (TTM) ended in Jun. 2014 was 478 (Sep. 2013 ) + 444 (Dec. 2013 ) + 444 (Mar. 2014 ) + 410 (Jun. 2014 ) = $1,776 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.

Seagate Technology PLC's annualized Return on Capital (ROC) for the quarter that ended in Jun. 2014 is calculated as:

Return on Capital (ROC)
=(EBIT - Adjusted Taxes)/(Book Value of Debt + Book Value of Equity - Cash)
=Net Income/(Total Current Assets + Property, Plant and Equipment + Other Current Assets)
=1280/(5777 + 2136 + 409)
=15.38 %

Note: The Net Income data used here is four times the quarterly (Jun. 2014) net income data.

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

Seagate Technology PLC's annualized Return on Capital (Joel Greenblatt’s) for the quarter that ended in Jun. 2014 is calculated as:

Return on Capital(Joel Greenblatt’s)
=EBIT/(Net fixed Assets + Net Working Capital)
=Operating Income/(Net Property, Plant and Equipment+Net Working Capital)
=1640/(2136 + max(725, 0))
=57.32 %

where Working Capital is:

Working Capital
=(Accounts Receivable + Inventory + Other Current Assets) - (Accounts Payable + Other Current Liabilities)
=(1729 + 985 + 409) - (2398 + 0)
=725

When net working capital is negative, 0 is used.

Note: The Operating Income data used here is four times the quarterly (Jun. 2014) operating income data.

3. It is also linked to Joel Greenblatt’s definition of Earnings Yield:

Seagate Technology PLC's Earnings Yield (Joel Greenblatt’s) for the quarter that ended in Jun. 2014 is calculated as:

Earnings Yield (Joel Greenblatt’s)=Operating Income (TTM)/Enterprise Value (Q: Jun. 2014 )
=1776/19853.7952
=8.95 %

4. EBIT is also linked to Operating Margin:

Seagate Technology PLC's Operating Margin for the quarter that ended in Jun. 2014 is calculated as:

Operating Margin=Operating Income (Q: Jun. 2014 )/Total Revenue (Q: Jun. 2014 )
=410/3301
=12.42 %

* 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


Historical Data

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

Seagate Technology PLC Annual Data

Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14
Operating Income 7228746141,376-2,6351,7408063,1082,0911,776

Seagate Technology PLC Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Operating Income 1,2101,057624555465447478444444410
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