Forge Group (ASX:FGE) Operating Income : A$87 Mil (TTM As of Jun. 2013)

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What is Forge Group Operating Income?

Forge Group's Operating Income for the six months ended in Jun. 2013 was A$87 Mil. Its Operating Income for the trailing twelve months (TTM) ended in Jun. 2013 was A$87 Mil.

Operating Margin % is calculated as Operating Income divided by its Revenue. Forge Group's Operating Income for the six months ended in Jun. 2013 was A$87 Mil. Forge Group's Revenue for the six months ended in Jun. 2013 was A$1,054 Mil. Therefore, Forge Group's Operating Margin % for the quarter that ended in Jun. 2013 was 8.23%.

Forge Group's 5-Year average Growth Rate for Operating Margin % was 0.00% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition. Forge Group's annualized ROC % for the quarter that ended in Jun. 2013 was 39.39%. Forge Group's annualized ROC (Joel Greenblatt) % for the quarter that ended in Jun. 2013 was 136.31%.

Forge Group Operating Income Historical Data

The historical data trend for Forge Group's Operating Income 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.

* Premium members only.

Forge Group Operating Income Chart

Forge Group Annual Data

Trend

Jun07

Jun08

Jun09

Jun10

Jun11

Jun12

Jun13

Operating Income

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16.46

29.42

38.75

66.98

86.75

Forge Group Semi-Annual Data
	Jun07	Jun08	Jun09	Jun10	Jun11	Jun12	Jun13
Operating Income	Get a 7-Day Free Trial			16.46	29.42	38.75	66.98	86.75

Forge Group Operating Income 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.

For stock reported annually, GuruFocus uses latest annual data as the TTM data. Operating Income for the trailing twelve months (TTM) ended in Jun. 2013 was A$87 Mil.

Forge Group (ASX:FGE) Operating Income Explanation

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

Forge Group's annualized ROC % for the quarter that ended in Jun. 2013 is calculated as:

	ROC % (Q: Jun. 2013 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Jun. 2012 )	+	Invested Capital (Q: Jun. 2013 ))	/ count )
=	86.745 * ( 1 - 30.17% )	/	( (156.357	+	151.166)	/ 2 )
=	60.5740335	/	153.7615
=	39.39 %

where

	Invested Capital		(Q: Jun. 2012 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	478.401	-	258.586	-	( 137.851	-	max(0, 285.095	-	348.553	+	137.851	))
=	156.357

	Invested Capital		(Q: Jun. 2013 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	464.21	-	219.568	-	( 93.476	-	max(0, 234.677	-	331.316	+	93.476	))
=	151.166

Note: The Operating Income data used here is one times the annual (Jun. 2013) data.

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

Forge Group's annualized ROC (Joel Greenblatt) % for the quarter that ended in Jun. 2013 is calculated as:

	ROC (Joel Greenblatt) %		(Q: Jun. 2013 )
=	EBIT	/	Average of (Net fixed Assets	+	Net Working Capital)
=	EBIT	/	Average of (Property, Plant and Equipment	+	Net Working Capital)
			Q: Jun. 2012		Q: Jun. 2013
=	EBIT	/	( ( (Property, Plant and Equipment + Net Working Capital)	+	(Property, Plant and Equipment + Net Working Capital) )	/	count )
=	94.925	/	( ( (67.736 + max(-262.743, 0))	+	(71.546 + max(-68.952, 0)) )	/	2 )
=	94.925	/	( ( 67.736	+	71.546 )	/	2 )
=	94.925	/	69.641
=	136.31 %

where Working Capital is:

	Working Capital		(Q: Jun. 2012 )
=	(Accounts Receivable	+	Total Inventories	+	Other Current Assets)	-	(Accounts Payable & Accrued Expense	+	Defer. Rev.	+	Other Current Liabilities)
=	(0	+	11.331	+	2.287)	-	(258.586	+	8.367	+	9.408)
=	-262.743

	Working Capital		(Q: Jun. 2013 )
=	(Accounts Receivable	+	Total Inventories	+	Other Current Assets)	-	(Accounts Payable & Accrued Expense	+	Defer. Rev.	+	Other Current Liabilities)
=	(0	+	150.491	+	4.095)	-	(219.568	+	0	+	3.97)
=	-68.952

When net working capital is negative, 0 is used.

Note: The EBIT data used here is one times the annual (Jun. 2013) EBIT data.

3. Operating Income is also linked to Operating Margin %:

Forge Group's Operating Margin % for the quarter that ended in Jun. 2013 is calculated as:

Operating Margin %	=	Operating Income (Q: Jun. 2013 )	/	Revenue (Q: Jun. 2013 )
	=	86.745	/	1054.1
	=	8.23 %

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.

Forge Group Operating Income Related Terms

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Forge Group (ASX:FGE) Business Description

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Website

http://www.forgegroup.com.au

Forge Group Ltd provides construction, commercial building, engineering, maintenance and workshop fabrication services. Its operations are segmented into four areas - Minerals & Resources, Power, Construction and Asset Management. The Minerals & Resources segment provides a wide range of engineering, design and construction services for the mining and metals sector. The Power segment provides turnkey power generation solutions to the energy and utilities sectors. The Construction segment offers a suite of construction services that covers all disciplines including heavy civil, structural, mechanical, piping, tanks, electrical, instrumentation, and building. Further, the Asset Management segment offers various asset management services. The Company has operational footprints across Australia, North America, Africa and Asia.

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