Profitability
Operating Margin
Operating margin is the share of revenue left after the costs of running the business, before interest and tax.
Operating income is profit from the actual operation: revenue minus cost of goods and operating expenses. The margin tells you how much of each sales dollar survives contact with the organization. It is the cleanest single profitability ratio for comparing firms with different debt and tax situations.
Stocklytics uses operating margin inside the quality score because a wide, stable margin is evidence the business can fund itself. Watch the trend across a cycle. A margin that only looks wide at the top of a boom will compress, and the earnings multiple will usually compress with it.
Formula
Operating margin = operating income ÷ revenue
Live example
Apple Inc. (AAPL) last printed at $345.33 with a market cap of $5.04T. Apply the formula on this page to that live price. Where the quote is missing an input, the stock page's financials are the next place to read it.
Related
Gross Margin · Net Margin · EBITDA
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Questions
How is it different from EBITDA margin?
Operating margin deducts depreciation and amortization. EBITDA margin adds them back. Operating margin is stricter.
Can margins rise while the stock falls?
Yes. The market may have expected a larger rise, or it may be worried about next year's revenue. Margin is one input to price, not the price.