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National Grid PLC  (NYSE:NGG) Operating Income: $3,960 Mil (TTM As of Sep. 2017)

National Grid PLC's Operating Income for the six months ended in Sep. 2017 was $1,699 Mil. ts operating income for the trailing twelve months (TTM) ended in Sep. 2017 was $3,960 Mil.

Operating Margin % is calculated as Operating Income divided by its Revenue. National Grid PLC's Operating Income for the six months ended in Sep. 2017 was $1,699 Mil. National Grid PLC's Revenue for the six months ended in Sep. 2017 was $8,912 Mil. Therefore, National Grid PLC's Operating Margin % for the quarter that ended in Sep. 2017 was 19.06%.

Warning Sign:

National Grid PLC operating margin has been in 5-year decline. The average rate of decline per year is -3.5%.

National Grid PLC's 5-Year average Growth Rate for Operating Margin % was -3.50% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition. National Grid PLC's annualized ROC % for the quarter that ended in Sep. 2017 was 5.43%. National Grid PLC's annualized ROC (Joel Greenblatt) % for the quarter that ended in Sep. 2017 was 7.20%.


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.

National Grid PLC Annual Data

Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Mar14 Mar15 Mar16 Mar17
Operating Income Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 5,654.60 6,204.32 4,411.06 4,594.02 3,960.49

National Grid PLC Semi-Annual Data

Mar08 Sep08 Mar09 Sep09 Mar10 Sep10 Mar11 Sep11 Mar12 Sep12 Mar13 Sep13 Mar14 Sep14 Mar15 Sep15 Mar16 Sep16 Mar17 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 2,835.89 1,960.11 1,934.30 2,143.21 1,698.67

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.

National Grid PLC's Operating Income for the fiscal year that ended in Mar. 2017 is calculated as

Operating Income(A: Mar. 2017 )
=Revenue-Cost of Goods Sold-Selling, General, & Admin. Expense
=18561.7283951-14601.2345679-0
-Research & Development-Depreciation, Depletion and Amortization-Others
-0-1828.39506173--1828.39506173
=3,960

National Grid PLC'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
=8912-7213.33333333-0
-Research & Development-Depreciation, Depletion and Amortization-Others (1)
-0-1016--1016
=1,699

Operating Income(Q: Sep. 2017 )
=EBITDA-Depreciation, Depletion and Amortization-Others (2)
=2849.33333333-1016-134.666666667
=1,699

For stock reported semi-annually, GuruFocus uses latest annual data as the TTM data. Operating Income for the trailing twelve months (TTM) ended in Sep. 2017 was $3,960 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.

National Grid PLC'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: Mar. 2017 ) + Invested Capital (Q: Sep. 2017 ))/2)
=3397.33333333 * ( 1 - 18.42% )/( (48303.7037037 + 53804)/2)
=2771.54453333/51053.8518519
=5.43 %

where

Invested Capital(Q: Mar. 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
=28570.3703704 + 6785.18518519 + 25145.6790123 - 12197.5308642
=48303.7037037

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
=29660 + 5152 + 22474.6666667 - 3482.66666667
=53804

Note: The Operating Income data used here is two times the semi-annual (Sep. 2017) operating income data.

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

National Grid PLC'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: Mar. 2017  Q: Sep. 2017
=EBIT/( ( (Property, Plant and Equipment + Net Working Capital) + (Property, Plant and Equipment + Net Working Capital) )/2 )
=3666.66666667/( ( (49166.6666667 + max(-1630.86419753, 0)) + (52646.6666667 + max(-685.333333333, 0)) )/2 )
=3666.66666667/( ( 49166.6666667 + 52646.6666667 )/2 )
=3666.66666667/50906.6666667
=7.20 %

where Working Capital is:

Working Capital(Q: Mar. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(1964.19753086 + 370.37037037 + 2225.92592593) - (3893.82716049 + 367.901234568 + 1929.62962963)
=-1630.86419753

Working Capital(Q: Sep. 2017 )
=(Accounts Receivable + Total Inventories + Other Current Assets) - (Accounts Payable & Accrued Expense + Defer. Rev. + Other Current Liabilities)
=(2916 + 625.333333333 + 800) - (3953.33333333 + 0 + 1073.33333333)
=-685.333333333

When net working capital is negative, 0 is used.

Note: The EBIT data used here is two times the semi-annual (Sep. 2017) EBIT data.

3. Operating Income is also linked to Operating Margin:

National Grid PLC'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 )
=1698.66666667/8912
=19.06 %

* 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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