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Toll Brothers Inc (NYSE:TOL)
Operating Margin
12.27% (As of Jul. 2014)

Operating margin is calculated as operating income divided by its revenue. Toll Brothers Inc's operating income for the three months ended in Jul. 2014 was $130 Mil. Toll Brothers Inc's revenue for the three months ended in Jul. 2014 was $1,057 Mil. Therefore, Toll Brothers Inc's operating margin for the quarter that ended in Jul. 2014 was 12.27%.

TOL' s 10-Year Operating Margin Range
Min: -29.46   Max: 21.72
Current: 9.94

-29.46
21.72
TOL's Operating Marginis ranked higher than
81% of the 472 Companies
in the Global Residential Construction industry.

( Industry Median: 5.13 vs. TOL: 9.94 )

Toll Brothers Inc's 3-Year Average operating margin Growth Rate was 0.00% per year.

Toll Brothers Inc's operating income for the three months ended in Jul. 2014 was $130 Mil. Its operating income for the trailing twelve months (TTM) ended in Jul. 2014 was $358 Mil.

Warning Sign:

Toll Brothers Inc 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.

Toll Brothers Inc's Operating Margin for the fiscal year that ended in Oct. 2013 is calculated as

Operating Margin=Operating Income (A: Oct. 2013 ) / Revenue (A: Oct. 2013 )
=201.067 / 2674.299
=7.52 %

Toll Brothers Inc's Operating Margin for the quarter that ended in Jul. 2014 is calculated as

Operating Margin=Operating Income (Q: Jul. 2014 ) / Revenue (Q: Jul. 2014 )
=129.644 / 1056.857
=12.27 %

* 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.

Toll Brothers Inc Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
Operating Margin 16.1721.7216.75-0.16-12.86-29.46-11.66-3.133.377.52

Toll Brothers Inc Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
Operating Margin -0.375.688.310.153.198.0112.334.947.9112.27
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