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Operating margin is calculated as operating income divided by its revenue. Diageo PLC's operating income for the six months ended in Dec. 2016 was $2,578 Mil. Diageo PLC's revenue for the six months ended in Dec. 2016 was $8,016 Mil. Therefore, Diageo PLC's operating margin for the quarter that ended in Dec. 2016 was 32.16%.
Diageo PLC's 5-Year Average operating margin Growth Rate was -0.90% per year.
Diageo PLC's operating income for the six months ended in Dec. 2016 was $2,578 Mil. Its operating income for the trailing twelve months (TTM) ended in Dec. 2016 was $4,036 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.
Diageo PLC's Operating Margin for the fiscal year that ended in Jun. 2016 is calculated as
|Operating Margin||=||Operating Income (A: Jun. 2016 )||/||Revenue (A: Jun. 2016 )|
Diageo PLC's Operating Margin for the quarter that ended in Dec. 2016 is calculated as
|Operating Margin||=||Operating Income (Q: Dec. 2016 )||/||Revenue (Q: Dec. 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.
Diageo PLC Annual Data
Diageo PLC Semi-Annual Data