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Adobe Systems Inc (NAS:ADBE)
Operating Margin
7.38% (As of Aug. 2014)

Operating margin is calculated as operating income divided by its revenue. Adobe Systems Inc's operating income for the three months ended in Aug. 2014 was $74 Mil. Adobe Systems Inc's revenue for the three months ended in Aug. 2014 was $1,005 Mil. Therefore, Adobe Systems Inc's operating margin for the quarter that ended in Aug. 2014 was 7.38%.

Warning Sign:

Adobe Systems Inc operating margin has been in 5-year decline. The average rate of decline per year is -12.5%.

ADBE' s 10-Year Operating Margin Range
Min: 6.29   Max: 37.05
Current: 9.5

6.29
37.05
ADBE's Operating Marginis ranked higher than
79% of the 1732 Companies
in the Global Software - Application industry.

( Industry Median: 5.56 vs. ADBE: 9.50 )

Adobe Systems Inc's 3-Year Average operating margin Growth Rate was -12.50% per year.

Adobe Systems Inc's operating income for the three months ended in Aug. 2014 was $74 Mil. Its operating income for the trailing twelve months (TTM) ended in Aug. 2014 was $391 Mil.


Definition

Operating margin - also known as operating income margin, operating profit margin and return on sales (ROS) - is the ratio of Operating Income divided by net sales or Revenue, usually presented in percent.

Adobe Systems Inc's Operating Margin for the fiscal year that ended in Nov. 2013 is calculated as

Operating Margin=Operating Income (A: Nov. 2013 ) / Revenue (A: Nov. 2013 )
=422.723 / 4055.24
=10.42 %

Adobe Systems Inc's Operating Margin for the quarter that ended in Aug. 2014 is calculated as

Operating Margin=Operating Income (Q: Aug. 2014 ) / Revenue (Q: Aug. 2014 )
=74.176 / 1005.409
=7.38 %

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


Explanation

Just like Gross Margin, it is important to see a company maintains its operating margin over time. Among the same industry, a company with higher operating margin is more efficient in its operation. It is also more stable during industry slowdown or recessions. Peter Lynch prefers those with higher margins than those with lower margins.


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

Gross Margin, Operating Income, Revenue, Cost of Goods Sold, Selling, General, & Admin. Expense (SGA), Research & Development, Depreciation, Depletion and Amortization


Historical Data

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

Adobe Systems Inc Annual Data

Nov04Nov05Nov06Nov07Nov08Nov09Nov10Nov11Nov12Nov13
Operating Margin 35.5137.0521.4127.1628.7223.4426.1326.0726.8010.42

Adobe Systems Inc Quarterly Data

May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14Aug14
Operating Margin 27.1425.7626.689.7511.0111.099.877.8712.667.38
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