QualityGP/Employee#38
Operating Cash Flow Margin expresses how efficiently a company converts capital into earnings.
By Javier Sanz, Founder & Lead AnalystEditorially reviewed
Last updated: Reviewed by: Javier Sanz
Formula
Gross Profit / Number of Employees
Description
Measures the gross profit generated per employee, indicating workforce productivity and the scalability of the business model. Companies with high gross profit per employee tend to have stronger competitive positions because they extract more value from their human capital.
Interpretation
Above $150K is generally strong. Technology and financial companies tend to lead this metric. Low gross profit per employee may indicate labor-intensive operations with limited pricing power. The trend over time is as important as the absolute level.
Related metrics: Return on Equity (ROE). (Updated 2026)
Further Reading
- SEC EDGAR primary filings on Operating Cash Flow Margin (OCF Margin)- Primary source filings used to calculate Operating Cash Flow Margin (OCF Margin).
FAQ
How is Operating Cash Flow Margin calculated?+
Operating Cash Flow Margin uses the formula: Gross Profit / Number of Employees. compare against sector median on /screener with the Sector filter applied. ValueMarkers refreshes the calculation within 24 hours of each new SEC filing using SEC EDGAR 10-K + 10-Q filings (segment-level disclosures).
What is a good Operating Cash Flow Margin value by sector?+
There is no single 'good' value for Operating Cash Flow Margin — context is sector-driven. compare against sector median on /screener with the Sector filter applied. The /screener exposes sector-relative percentiles for Operating Cash Flow Margin on every ticker, so you can compare against the sector median rather than the broad-market median.
Which investors use Operating Cash Flow Margin?+
Charlie Munger, Joel Greenblatt, Terry Smith cite Operating Cash Flow Margin as a key input to to find compounders with durable economic moats. The academic anchor is Greenblatt (2005) Magic Formula and Mauboussin (2014). ValueMarkers weights this within the Quality pillar of the VMCI score (30% of total).
What are the limitations of Operating Cash Flow Margin?+
Operating Cash Flow Margin can mislead in asset-light businesses where conventional capital ratios mislead. Pair Operating Cash Flow Margin with at least two cross-checks from other VMCI pillars — for example, free cash flow trend, balance-sheet quality, and earnings consistency — before drawing a single-metric conclusion.
Where can I see live Operating Cash Flow Margin data?+
Visit any /stock/[ticker] page on ValueMarkers to see live Operating Cash Flow Margin data, sector percentiles, and the VMCI composite score that integrates Operating Cash Flow Margin with 119 other indicators across 100,000+ stocks. The free /screener exposes Operating Cash Flow Margin as a filterable column.
Related Quality Indicators
Return on Equity (ROE)Op Margin
Return on Equity measures how efficiently a company converts capital into earnings.
Return on Assets (ROA)Net Margin
Return on Assets is the metric used to how efficiently a company converts capital into earnings.
Return on Invested Capital (ROIC)EBITDA Margin
Return on Invested Capital measures how efficiently a company converts capital into earnings.
Return on Capital Employed (ROCE)FCF Margin
Return on Capital Employed is the metric used to how efficiently a company converts capital into earnings.
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