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Discover Financial Services (NYSE:DFS)
Operating Margin
46.73% (As of Jun. 2014)

Operating margin is calculated as operating income divided by its revenue. Discover Financial Services's operating income for the three months ended in Jun. 2014 was $1,015 Mil. Discover Financial Services's revenue for the three months ended in Jun. 2014 was $2,172 Mil. Therefore, Discover Financial Services's operating margin for the quarter that ended in Jun. 2014 was 46.73%.

Good Sign:

Discover Financial Services operating margin is expanding. Margin expansion is usually a good sign.

DFS' s 10-Year Operating Margin Range
Min: 18.71   Max: 49.69
Current: 47.96

18.71
49.69
DFS's Operating Marginis ranked higher than
86% of the 133 Companies
in the Global Credit Services industry.

( Industry Median: 25.65 vs. DFS: 47.96 )

Discover Financial Services's 3-Year Average operating margin Growth Rate was 15.10% per year.

Discover Financial Services's operating income for the three months ended in Jun. 2014 was $1,015 Mil. Its operating income for the trailing twelve months (TTM) ended in Jun. 2014 was $3,920 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.

Discover Financial Services's Operating Margin for the fiscal year that ended in Dec. 2013 is calculated as

Operating Margin=Operating Income (A: Dec. 2013 ) / Revenue (A: Dec. 2013 )
=3944 / 8224
=47.96 %

Discover Financial Services's Operating Margin for the quarter that ended in Jun. 2014 is calculated as

Operating Margin=Operating Income (Q: Jun. 2014 ) / Revenue (Q: Jun. 2014 )
=1015 / 2172
=46.73 %

* 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.

Discover Financial Services Annual Data

Nov05Nov06Nov07Nov08Nov09Nov10Nov11Nov12Dec12Dec13
Operating Margin 0.0031.2918.7134.4931.4919.0649.6949.0448.9547.96

Discover Financial Services Quarterly Data

May12Aug12Nov12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Operating Margin 46.9251.5243.0441.8254.2248.0645.8844.0149.1846.73
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