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rue21 Inc (NAS:RUE)
Operating Margin
0.76% (As of Jul. 2013)

Operating margin is calculated as operating income divided by its revenue. rue21 Inc's operating income for the three months ended in Jul. 2013 was \$1.7 Mil. rue21 Inc's revenue for the three months ended in Jul. 2013 was \$229.3 Mil. Therefore, rue21 Inc's operating margin for the quarter that ended in Jul. 2013 was 0.76%.

rue21 Inc's 5-Year Average operating margin Growth Rate was 0.00% per year.

rue21 Inc's operating income for the three months ended in Jul. 2013 was \$1.7 Mil. Its operating income for the trailing twelve months (TTM) ended in Jul. 2013 was \$55.1 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.

rue21 Inc's Operating Margin for the fiscal year that ended in Jan. 2013 is calculated as

 Operating Margin = Operating Income (A: Jan. 2013 ) / Revenue (A: Jan. 2013 ) = 68.461 / 901.886 = 7.59 %

rue21 Inc's Operating Margin for the quarter that ended in Jul. 2013 is calculated as

 Operating Margin = Operating Income (Q: Jul. 2013 ) / Revenue (Q: Jul. 2013 ) = 1.74 / 229.322 = 0.76 %

* 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

Historical Data

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

rue21 Inc Annual Data

 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Operating Margin 0.00 0.00 0.00 0.00 5.92 5.66 7.03 7.87 8.27 7.59

rue21 Inc Quarterly Data

 Apr11 Jul11 Oct11 Jan12 Apr12 Jul12 Oct12 Jan13 Apr13 Jul13 Operating Margin 9.12 7.15 7.06 9.54 8.93 6.79 5.71 8.75 7.55 0.76
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