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D.R. Horton Inc  (NYSE:DHI) Operating Income: $1,577 Mil (TTM As of Sep. 2017)

D.R. Horton Inc's Operating Income for the three months ended in Sep. 2017 was $479 Mil. ts operating income for the trailing twelve months (TTM) ended in Sep. 2017 was $1,577 Mil.

Operating Margin % is calculated as Operating Income divided by its Revenue. D.R. Horton Inc's Operating Income for the three months ended in Sep. 2017 was $479 Mil. D.R. Horton Inc's Revenue for the three months ended in Sep. 2017 was $4,159 Mil. Therefore, D.R. Horton Inc's Operating Margin % for the quarter that ended in Sep. 2017 was 11.52%.

Good Sign:

D.R. Horton Inc operating margin is expanding. Margin expansion is usually a good sign.

D.R. Horton Inc's 5-Year average Growth Rate for Operating Margin % was 11.00% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition. D.R. Horton Inc's annualized ROC % for the quarter that ended in Sep. 2017 was 14.54%. D.R. Horton Inc's annualized ROC (Joel Greenblatt) % for the quarter that ended in Sep. 2017 was 23.44%.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

D.R. Horton Inc Annual Data

Sep08 Sep09 Sep10 Sep11 Sep12 Sep13 Sep14 Sep15 Sep16 Sep17
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 634.40 790.90 1,102.30 1,334.50 1,576.60

D.R. Horton Inc Quarterly Data

Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 438.10 310.40 346.20 440.80 479.10

Calculation

Operating income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

D.R. Horton Inc's Operating Income for the fiscal year that ended in Sep. 2017 is calculated as

Operating Income(A: Sep. 2017 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=14091-11042.8-1471.6
-Research & Development-Depreciation, Depletion and Amortization-Others
-0-54.7--54.7
=1,577

D.R. Horton Inc's Operating Income for the quarter that ended in is calculated as

Operating Income(Q: Sep. 2017 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=4159.1-3263.9-416.1
-Research & Development-Depreciation, Depletion and Amortization-Others (1)
-0-14.3--14.3
=479

Operating Income(Q: Sep. 2017 )
=EBITDA-Depreciation, Depletion and Amortization-Others (2)
=493.4-14.3--5.68434188608E-14
=479

Operating Income for the trailing twelve months (TTM) ended in Sep. 2017 was 310.4 (Dec. 2016 ) + 346.2 (Mar. 2017 ) + 440.8 (Jun. 2017 ) + 479.1 (Sep. 2017 ) = $1,577 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition.

D.R. Horton Inc's annualized ROC % for the quarter that ended in Sep. 2017 is calculated as:

ROC %(Q: Sep. 2017 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Jun. 2017 ) + Invested Capital (Q: Sep. 2017 ))/2)
=1916.4 * ( 1 - 35.48% )/( (9850.3 + 7159.3)/2)
=1236.46128/8504.8
=14.54 %

where

Invested Capital(Q: Jun. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Total Equity - Cash
=2926.5 + 0 + 7436.2 - 512.4
=9850.3

Invested Capital(Q: Sep. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Total Equity - Cash
=420 + 0 + 7747.1 - 1007.8
=7159.3

Note: The Operating Income data used here is four times the quarterly (Sep. 2017) operating income data.

2. Joel Greenblatt's definition of Return on Capital:

D.R. Horton Inc's annualized ROC (Joel Greenblatt) % for the quarter that ended in Sep. 2017 is calculated as:

ROC (Joel Greenblatt's)(Q: Sep. 2017 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=EBIT/Average of (Property, Plant and Equipment+Net Working Capital)
     Q: Jun. 2017  Q: Sep. 2017
=EBIT/( ( (Property, Plant and Equipment + Net Working Capital) + (Property, Plant and Equipment + Net Working Capital) )/2 )
=1916.4/( ( (282.8 + max(8004.7, 0)) + (325 + max(7737.7, 0)) )/2 )
=1916.4/( ( 8287.5 + 8062.7 )/2 )
=1916.4/8175.1
=23.44 %

where Working Capital is:

Working Capital(Q: Jun. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(0 + 9554 + 10.9) - (895.1 + 0 + 665.1)
=8004.7

Working Capital(Q: Sep. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(0 + 9237.1 + 9.3) - (859 + 0 + 649.7)
=7737.7

When net working capital is negative, 0 is used.

Note: The EBIT data used here is four times the quarterly (Sep. 2017) EBIT data.

3. Operating Income is also linked to Operating Margin:

D.R. Horton Inc's Operating Margin % for the quarter that ended in Sep. 2017 is calculated as:

Operating Margin %=Operating Income (Q: Sep. 2017 )/Revenue (Q: Sep. 2017 )
=479.1/4159.1
=11.52 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

4. Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the operating income growth rate using operating income per share data.


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.


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