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XeroASX:XRO +0.49%72 Degree of Operating Leverage is -0.21 as of Mar. 2026. GuruFocus rates ASX:XRO with a GF Score™ of 72/100 and a GF Value™ of A$204.73 (Possible Value Trap). The stock has 6 warning signs investors should review. Among 2,708 Software companies, Xero ranks better than 61.56% on this metric.
Degree of Operating Leverage (DOL) measures the percentage change in EBIT for a unit change in Revenue.
Xero's Degree of Operating Leverage for the quarter that ended in Mar. 2026 was -0.21. The higher Degree of Operating Leverage, the higher operating risk the company will take.
The industry rank for Xero's Degree of Operating Leverage or its related term are showing as below:
ASX:XRO's Degree of Operating Leverage is ranked better than 61.56% of 2708
companies
in the Software industry
Industry Median: 0.645
vs ASX:XRO: -0.21
Xero (ASX:XRO) Degree of Operating Leverage Explanation
Degree of Operating Leverage (DOL) is a leverage ratio that measures the sensitivity of a company’s operting income, also referred to as Earnings Before Interest and Taxes (EBIT), to fluctuations in its Revenue. DOL is a method used to quantify a company’s operating risk. This risk is related to the company's structure of variable costs and fixed costs. Since the fixed costs do not allow the company to adjust the operating costs, the operating risk rises with a higher fixed-to-variable costs proportion.
A high Degree of Operating Leverage indicates that the company’s fixed costs exceed its variable costs. By increasing the sales, the company can earn more profits. In addition, the company must be able to maintain relatively high sales to cover all fixed costs.
Be Aware
The use of operating leverage varies across different industries and business sectors, and the application of Degree of Operating Leverage (DOL) should be adjusted accordingly.
Xero Degree of Operating Leverage Related Terms
Xero Degree of Operating Leverage Historical Data
* Premium members only.
The historical data trend for Xero's Degree of Operating Leverage can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
ASX:XRO vs CRM, SHOP, UBER: Degree of Operating Leverage Comparison
For the Software - Application subindustry, Xero's Degree of Operating Leverage, along with its competitors' market caps and Degree of Operating Leverage data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Xero Degree of Operating Leverage vs Software Industry
For the Software industry and Technology sector, Xero's Degree of Operating Leverage distribution charts can be found below:
* The bar in red indicates where Xero's Degree of Operating Leverage falls into.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
** TTM data of EBIT and Revenue was used to calculate Degree of Operating Leverage.
*** Please be aware that the Degree of Operating Leverage calculations are based on company-level data using the primary share class. The calculated data provided is for demonstration purposes and may slightly differ from the results displayed in the title due to potential variations caused by currency exchange rate differences throughout the year.
What does a Degree of Operating Leverage of -0.21 mean?
Xero (ASX:XRO) has a Degree of Operating Leverage of -0.21 as of Mar. 2026. Degree of Operating Leverage (DOL) measures the percentage change in EBIT for a unit change in Revenue. View historical data for Xero and its competitors. According to the industry distribution chart, Xero ranks #1041 out of 2708 companies in the Software industry, placing it in the top 38.4%.
Is Xero's Degree of Operating Leverage too high?
Xero's current Degree of Operating Leverage is -0.21. Based on the distribution chart, Xero ranks #1041 out of 2708 companies in the Software industry, which is above the industry midpoint. Overall, Xero has a GF Score™ of 72/100 and is considered Possible Value Trap, reflecting its overall financial health beyond just this single metric.
How does Xero's Degree of Operating Leverage compare to CRM and SHOP?
According to the Software industry distribution chart, Xero ranks #1041 out of 2708 companies for Degree of Operating Leverage. This puts Xero in the upper half of its industry. The industry median Degree of Operating Leverage is 0.65. See the competitive comparison table and distribution chart on this page for a detailed peer-by-peer breakdown.
What is a good Degree of Operating Leverage for a Software company?
The median Degree of Operating Leverage among Software companies is 0.65, based on 2,708 companies in the industry. Companies in the top quartile (top 25%) have a Degree of Operating Leverage significantly above this median, while those in the bottom quartile fall well below. However, Degree of Operating Leverage should not be evaluated in isolation — investors should consider it alongside profitability, growth, and financial strength metrics. Use the industry distribution chart on this page to see where any company falls relative to its peers.
What does a high Degree of Operating Leverage mean?
A high Degree of Operating Leverage can signal that a stock is expensive relative to its fundamentals. Degree of Operating Leverage (DOL) measures the percentage change in EBIT for a unit change in Revenue. View historical data for Xero and its competitors. For the Software industry, the median Degree of Operating Leverage is 0.65 — values significantly above this may indicate overvaluation, while values below may suggest a bargain or underlying issues. Xero's current Degree of Operating Leverage is -0.21. However, context matters — high-growth companies often justify higher valuations. Always evaluate alongside other metrics like GF Score™ and GF Value™.
Is Xero stock overvalued right now?
Based on GuruFocus' analysis, Xero (ASX:XRO) is currently considered Possible Value Trap. The stock's GF Value™ is A$204.73, compared to a current price of A$83.28 — trading 59.3% below its estimated fair value. The current Degree of Operating Leverage is -0.21. Xero's overall GF Score™ is 72/100 with 6 warning signs to review. Investors should evaluate multiple metrics — including profitability, growth, and financial strength — before making a decision.
How is Degree of Operating Leverage calculated?
Degree of Operating Leverage is calculated from a company's financial statements. For Xero (ASX:XRO), the current Degree of Operating Leverage is -0.21 as of Mar. 2026. GuruFocus calculates this using data sourced from SEC filings and annual reports. See the calculation section and 30-year financial data on this page for the full breakdown.
Is Xero (ASX:XRO) Overvalued in 2026?
Based on GuruFocus' analysis, Xero stock appears to be undervalued.
The current stock price of A$83.28 is trading 59.3% below its estimated GF Value™ of A$204.73.
GuruFocus considers Xero to be Possible Value Trap.
Key valuation signals for ASX:XRO:
Degree of Operating Leverage: -0.21
GF Value™: A$204.73 vs. price of A$83.28 (59.3% below fair value)
No single metric tells the full story. See the ASX:XRO stock analysis page for a complete view including 30-year financials, guru trades, and insider activity.
Xero is a technology company originating from New Zealand, providing cloud-based accounting software, primarily for small and midsized enterprises, or SMEs, and accounting practices. As a first mover in the space for cloud-based accounting software, Xero has grown quickly to achieve dominant market share in New Zealand and Australia, displacing legacy providers. Xero has also expanded beyond its home region toward other English-speaking countries, primarily the UK and the US.
72GF Score
Get the complete analysis for ASX:XRO
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