Switch to:
CA Inc (NAS:CA)
Operating Income
$1,150 Mil (TTM As of Jun. 2015)

CA Inc's operating income for the three months ended in Jun. 2015 was $301 Mil. Its operating income for the trailing twelve months (TTM) ended in Jun. 2015 was $1,150 Mil.

Operating margin is calculated as operating income divided by its revenue. CA Inc's operating income for the three months ended in Jun. 2015 was $301 Mil. CA Inc's revenue for the three months ended in Jun. 2015 was $977 Mil. Therefore, CA Inc's operating margin for the quarter that ended in Jun. 2015 was 30.81%.

CA Inc's 3-Year average Growth Rate for operating margin was -0.50% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition. CA Inc's annualized return on capital for the quarter that ended in Jun. 2015 was 20.46%. CA Inc's annualized return on capital (Joel Greenblatt’s) for the quarter that ended in Jun. 2015 was 477.78%.


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.

CA Inc's Operating Income for the fiscal year that ended in Mar. 2015 is calculated as

Operating Income(A: Mar. 2015 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=4262-635-1437
-Research & Development-Depreciation, Depletion & Amortization-Others
-603-402-23
=1,162

CA Inc's Operating Income for the quarter that ended in Jun. 2015 is calculated as

Operating Income(Q: Jun. 2015 )
=EBITDA-Depreciation, Depletion & Amortization-Others (2)
=388-87-0
=301

CA Inc Operating Income for the trailing twelve months (TTM) ended in Jun. 2015 was 320 (Sep. 2014 ) + 318 (Dec. 2014 ) + 211 (Mar. 2015 ) + 301 (Jun. 2015 ) = $1,150 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.

CA Inc's annualized Return on Capital (ROC) for the quarter that ended in Jun. 2015 is calculated as:

Return on Capital (ROC)(Q: Jun. 2015 )
=NOPAT/Average Invested Capital
=Oper. Inc.*(1-Tax Rate)/( (Invested Capital (Q: Mar. 2015 ) + Invested Capital (Q: Jun. 2015 ))/2)
=1204 * ( 1 - 29.83% )/( (4084 + 4175)/2)
=844.8468/4129.5
=20.46 %

where

Invested Capital(Q: Mar. 2015 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=1253 + 10 + 5625 - 2804
=4084

Invested Capital(Q: Jun. 2015 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=1250 + 8 + 5733 - 2816
=4175

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

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

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

ROC (Joel Greenblatt’s)(Q: Jun. 2015 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Net PPE+Net Working Capital)
     Q: Mar. 2015  Q: Jun. 2015
=EBIT/( ( (Net PPE + Net Working Capital) + (Net PPE + Net Working Capital) )/2 )
=1204/( ( (252 + max(-1745, 0)) + (252 + max(-1749, 0)) )/2 )
=1204/( ( 252 + 252 )/2 )
=1204/252
=477.78 %

where Working Capital is:

Working Capital(Q: Mar. 2015 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(591 + 0 + 592) - (807 + 2121 + 0)
=-1745

Working Capital(Q: Jun. 2015 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(438 + 0 + 491) - (631 + 2047 + 0)
=-1749

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 (Jun. 2015) EBIT data.

3. Operating Income is also linked to Operating Margin:

CA Inc's Operating Margin for the quarter that ended in Jun. 2015 is calculated as:

Operating Margin=Operating Income (Q: Jun. 2015 )/Total Revenue (Q: Jun. 2015 )
=301/977
=30.81 %

* 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.

CA Inc Annual Data

Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14Mar15
Operating Income 1512018601,1271,2471,2541,3891,3621,3011,162

CA Inc Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
Operating Income 274228359334380313320318211301
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GuruFocus Premium Plus Membership

FEEDBACK