Using operating ratio to assess transportation companies has its pros and cons, say experts

(Source: Freight Waves, April 18, 2021)

CHATTANOOGA, Tenn. — Operating ratio (OR) is a way for investors to compare the financials of one company against its peers. Investors use OR to gauge whether a company is generating sufficient profits. The formula to calculate OR is to divide a company’s operating expenses by its revenue. Put differently, it is one minus the operating margin percentage. For example, a 20% operating margin is the equivalent of an 80% operating ratio. Operating expenses include items such as fuel, maintenance, and crew or employee costs, as well as toll expenses or maintenance-of-way costs. They also include equipment rentals.

Full story: Freight Waves

Monday, April 19, 2021