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Use to find companies where this pattern is active.
Three observations describe a low-D&A profile alongside rising operating income: operating income has increased year-over-year across the trailing four years, EBIT is close to EBITDA in the most recent period (small D&A), and non-current assets are a large share of total assets. The composition is consistent with under-depreciation or a young asset base whose depreciation has not yet caught up.
State
Operating income increased year-over-year while EBIT is close to EBITDA and non-current assets are a large share of total assets
Emergence
Three observations point at a low-D&A, capital-heavy profile alongside rising operating income. Operating income has increased year-over-year over the trailing four years. EBIT sits close to EBITDA (small D&A relative to EBITDA in the most recent period). And non-current assets are a large share of total assets. The composition note: operating income is rising while D&A charges are small despite a capital-heavy balance sheet — consistent with an under-depreciating policy or a young, recently-built asset base whose depreciation has not yet caught up.
Limits
This interpretation identifies a composition pattern between operating-income trajectory, the EBIT-vs-EBITDA gap, and balance-sheet capital intensity, not accounting fraud. The 'operating-income-rising-4y' obs counts operating-income YoY increases (not margin trend); 'capital-intensity' is a static balance-sheet composition snapshot. It does not claim depreciation policy is inappropriate, predict margin reversal, or assess whether useful lives are correct. Different industries genuinely have different depreciation profiles, and a recently-built asset base will legitimately show small D&A before the schedule catches up.
Explanation
This diagnostic clarifies a composition reading: Surface reading: Rising operating income suggests a business becoming more efficient. Structural reality: Operating Income Increased Year-Over-Year (4 years) indicates operating income has risen consistently. However, EBIT to EBITDA Ratio is high — the ratio sits close to 1.0, meaning depreciation and amortization were small relative to EBITDA in the most recent period. And Capital Intensity (non-current assets / total assets) is high — non-current assets are a large share of the asset base. The formula is a static snapshot, not a time-series spike measure. The combination shows small D&A on a capital-heavy balance sheet alongside rising operating income — consistent with under-depreciation or with a young asset base whose depreciation schedule has not yet caught up with the asset build. The observations do not establish which.
Interpretation
This interpretation identifies a composition pattern between operating-income trajectory, D&A weight, and balance-sheet capital intensity. It does not claim accounting is aggressive, predict margin reversal, or assess useful asset lives.
Required Observations
Capital Intensity
Non-current assets as fraction of total assets
Ebit To Ebitda
How much of EBITDA survives as EBIT
Operating Income Rising 4y
Operating income posted a year-over-year increase in each of the most recent 4 fiscal years