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Operating margin is calculated as operating income divided by its revenue. Brocade Communications Systems Inc's operating income for the three months ended in Jul. 2016 was $21 Mil. Brocade Communications Systems Inc's revenue for the three months ended in Jul. 2016 was $591 Mil. Therefore, Brocade Communications Systems Inc's operating margin for the quarter that ended in Jul. 2016 was 3.49%.
Brocade Communications Systems Inc operating margin is expanding. Margin expansion is usually a good sign.
Brocade Communications Systems Inc's 5-Year Average operating margin Growth Rate was 19.60% per year.
Brocade Communications Systems Inc's operating income for the three months ended in Jul. 2016 was $21 Mil. Its operating income for the trailing twelve months (TTM) ended in Jul. 2016 was $343 Mil.
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.
Brocade Communications Systems Inc's Operating Margin for the fiscal year that ended in Oct. 2015 is calculated as
|Operating Margin||=||Operating Income (A: Oct. 2015 )||/||Revenue (A: Oct. 2015 )|
Brocade Communications Systems Inc's Operating Margin for the quarter that ended in Jul. 2016 is calculated as
|Operating Margin||=||Operating Income (Q: Jul. 2016 )||/||Revenue (Q: Jul. 2016 )|
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.
Compared with a companys 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 companys 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 Nokias 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. GuruFocuss 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.
Brocade Communications Systems Inc Annual Data
Brocade Communications Systems Inc Quarterly Data