Operating leverage (Op leverage)
How much operating profit moved for each percentage point revenue moved, over the last year.
High operating leverage magnifies both directions: wonderful into an upturn, brutal into a downturn.
How it is computed here
Percentage change in operating income / percentage change in revenue
Computed across several filed fiscal years. Filed under risk. Neither a high nor a low reading is good on its own, so it is never coloured as one.
No published threshold exists for this figure, so this page prints none. Read it against the company's own history and its peers instead.
When it misleads
- A one-year ratio of two changes. It is extremely noisy and flips sign easily.
- Meaningless when revenue barely moved, because the denominator approaches zero.
Questions
How is operating leverage calculated?
Percentage change in operating income / percentage change in revenue. Computed across several filed fiscal years.
What does operating leverage tell a value investor?
High operating leverage magnifies both directions: wonderful into an upturn, brutal into a downturn.
When does operating leverage mislead?
A one-year ratio of two changes. It is extremely noisy and flips sign easily. Meaningless when revenue barely moved, because the denominator approaches zero.