Switch to:
Matthews International Corporation (NAS:MATW)
Operating Income
$112 Mil (TTM As of Jun. 2016)

Matthews International Corporation's operating income for the three months ended in Jun. 2016 was $41 Mil. Its operating income for the trailing twelve months (TTM) ended in Jun. 2016 was $112 Mil.

Operating margin is calculated as operating income divided by its revenue. Matthews International Corporation's operating income for the three months ended in Jun. 2016 was $41 Mil. Matthews International Corporation's revenue for the three months ended in Jun. 2016 was $382 Mil. Therefore, Matthews International Corporation's operating margin for the quarter that ended in Jun. 2016 was 10.64%.

Warning Sign:

Matthews International Corporation operating margin has been in 5-year decline. The average rate of decline per year is -13.6%.

Matthews International Corporation's 5-Year average Growth Rate for operating margin was -13.60% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt’s definition. Matthews International Corporation's annualized return on capital for the quarter that ended in Jun. 2016 was 7.03%. Matthews International Corporation's annualized return on capital (Joel Greenblatt’s) for the quarter that ended in Jun. 2016 was 32.22%.


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.

Matthews International Corporation's Operating Income for the fiscal year that ended in Sep. 2015 is calculated as

Operating Income(A: Sep. 2015 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=1426.068-896.693-424.352
-Research & Development-Depreciation, Depletion & Amortization-Others
-0-62.62--62.62
=105

Matthews International Corporation's Operating Income for the quarter that ended in Jun. 2016 is calculated as

Operating Income(Q: Jun. 2016 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=382.061-236.764-104.627
-Research & Development-Depreciation, Depletion & Amortization-Others (1)
-0-17.12--17.12
=41

Operating Income(Q: Jun. 2016 )
=EBITDA-Depreciation, Depletion & Amortization-Others (2)
=58.774-17.12-0.984
=41

Matthews International Corporation Operating Income for the trailing twelve months (TTM) ended in Jun. 2016 was 32.758 (Sep. 2015 ) + 12.038 (Dec. 2015 ) + 26.435 (Mar. 2016 ) + 40.67 (Jun. 2016 ) = $112 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.

Matthews International Corporation's annualized Return on Capital (ROC) for the quarter that ended in Jun. 2016 is calculated as:

Return on Capital (ROC)(Q: Jun. 2016 )
=NOPAT/Average Invested Capital
=Oper. Inc.*(1-Tax Rate)/( (Invested Capital (Q: Mar. 2016 ) + Invested Capital (Q: Jun. 2016 ))/2)
=162.68 * ( 1 - 32.79% )/( (1571.459 + 1539.044)/2)
=109.337228/1555.2515
=7.03 %

where

Invested Capital(Q: Mar. 2016 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=875.316 + 12.857 + 742.618 - 59.332
=1571.459

Invested Capital(Q: Jun. 2016 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt + Short-Term Debt + Total Equity - Cash
=898.177 + 21.246 + 694.104 - 74.483
=1539.044

Note: The Operating Income data used here is four times the quarterly (Jun. 2016) operating income data.

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

Matthews International Corporation's annualized Return on Capital (Joel Greenblatt’s) for the quarter that ended in Jun. 2016 is calculated as:

ROC (Joel Greenblatt’s)(Q: Jun. 2016 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Net PPE+Net Working Capital)
     Q: Mar. 2016  Q: Jun. 2016
=EBIT/( ( (Net PPE + Net Working Capital) + (Net PPE + Net Working Capital) )/2 )
=166.616/( ( (229.402 + max(302.088, 0)) + (222.32 + max(280.564, 0)) )/2 )
=166.616/( ( 531.49 + 502.884 )/2 )
=166.616/517.187
=32.22 %

where Working Capital is:

Working Capital(Q: Mar. 2016 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(273.785 + 169.304 + 76.194) - (125.47 + 0 + 91.725)
=302.088

Working Capital(Q: Jun. 2016 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(285.184 + 166.723 + 73.328) - (144.594 + 0 + 100.077)
=280.564

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. 2016) EBIT data.

3. Operating Income is also linked to Operating Margin:

Matthews International Corporation's Operating Margin for the quarter that ended in Jun. 2016 is calculated as:

Operating Margin=Operating Income (Q: Jun. 2016 )/Total Revenue (Q: Jun. 2016 )
=40.67/382.061
=10.64 %

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

4. Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the operating income growth rate using operating income per share data.


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, Growth Rate Calculation Example (GuruFocus)


Historical Data

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

Matthews International Corporation Annual Data

Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15
Operating Income 114112133101117119939582105

Matthews International Corporation Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
Operating Income 21321426192733122641
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)
FEEDBACK