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The Scotts Miracle Gro Co (NYSE:SMG)
Operating Margin
21.82% (As of Jun. 2016)

Operating margin is calculated as operating income divided by its revenue. The Scotts Miracle Gro Co's operating income for the three months ended in Jun. 2016 was $217 Mil. The Scotts Miracle Gro Co's revenue for the three months ended in Jun. 2016 was $994 Mil. Therefore, The Scotts Miracle Gro Co's operating margin for the quarter that ended in Jun. 2016 was 21.82%.

Warning Sign:

The Scotts Miracle Gro Co operating margin has been in 5-year decline. The average rate of decline per year is -1.8%.

SMG' s Operating Margin Range Over the Past 10 Years
Min: 3.29   Max: 12.53
Current: 14.75

3.29
12.53
SMG's Operating Margin is ranked higher than
82% of the 212 Companies
in the Global Agricultural Inputs industry.

( Industry Median: 5.48 vs. SMG: 14.75 )

The Scotts Miracle Gro Co's 5-Year Average operating margin Growth Rate was -1.80% per year.

The Scotts Miracle Gro Co's operating income for the three months ended in Jun. 2016 was $217 Mil. Its operating income for the trailing twelve months (TTM) ended in Jun. 2016 was $464 Mil.

Warning Sign:

The Scotts Miracle Gro Co had operating loss over the past 3 years.


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.

The Scotts Miracle Gro Co's Operating Margin for the fiscal year that ended in Sep. 2015 is calculated as

Operating Margin=Operating Income (A: Sep. 2015 ) / Revenue (A: Sep. 2015 )
=294.6 / 3016.5
=9.77 %

The Scotts Miracle Gro Co's Operating Margin for the quarter that ended in Jun. 2016 is calculated as

Operating Margin=Operating Income (Q: Jun. 2016 ) / Revenue (Q: Jun. 2016 )
=216.9 / 994.1
=21.82 %

* 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.

The Scotts Miracle Gro Co Annual Data

Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15
Operating Margin 9.369.653.299.9812.539.828.7111.1911.079.77

The Scotts Miracle Gro Co Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
Operating Margin 20.0818.00-3.02-49.0321.6117.22-3.24-40.7829.6521.82
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