Definition:

1-year Operating Income Growth Rate measures the percentage change in a company's operating income over a one-year period. It reflects the company's ability to increase its earnings from core business operations.

Formula:

((Operating Income at End of Year - Operating Income at Start of Year) / Operating Income at Start of Year) * 100

How to use the metric:

This metric is used by investors and analysts to assess a company's operational efficiency and profitability growth over a short-term period. A positive growth rate indicates improved operational performance, while a negative rate may signal potential issues.

Limitations:

This metric does not account for non-operating income or expenses, which can impact overall profitability. It also does not consider external factors such as market conditions or industry trends that may affect operating income.

Applies to:

This metric is useful in industries where operating income is a key indicator of performance, such as manufacturing, retail, and technology, where operational efficiency is crucial.

Doesn't apply to:

Industries with significant non-operating income or expenses, such as financial services or real estate, may not find this metric as relevant because it does not capture the full picture of profitability.

Summary:

The 1-year Operating Income Growth Rate is a valuable metric for evaluating a company's short-term operational performance and efficiency. However, it should be used alongside other financial metrics to gain a comprehensive understanding of a company's financial health.