Profit margin, also known as Profit Margin in English, indicates the ratio of a company's profit to its total revenue, generally expressed as a percentage. Profit rate can be used to measure the operating status of listed companies and is an important indicator for analyzing the fundamentals of listed companies. Profit margin indicates the profit as a percentage of a company's total sales. For example, if a public company achieves a profit margin of 35%, this means that for every $100 of revenue, the company has a profit of $35 (Profit). What are the different categories of profit margins? In the article "Interpreting Company Profit", we introduced three types of profits: gross profit, operating profit and net profit. The three profit calculation methods are summarized as follows: Gross Profit = Total Revenue – Cost of Goods Sold Operating Profit = Total Revenue – (Cost of Sales + Operating Cost) Net Profit = Total Revenue – (Cost of Sales + Operating Cost + Other Expenses) Therefore, there are three types of profit margins: gross profit margin, operating profit margin, and net profit margin. gross profit margin Gross profit margin, also known as "gross profit margin", in English is Gross Profit Magin, which refers to the ratio of gross profit to total revenue. The calculation formula is as follows: Gross Profit Margin = Gross Profit ➗ Total Revenue Among them, For example, a publicly traded company sells 100 shirts at a price of $25/piece, and the cost of selling each shirt is $10/piece. Then, its gross profit margin is: Gross profit margin = ($25 – $10) / $25 = 60% operating profit margin Operating profit margin, in English, is Operating Profit Margin, which refers to the ratio of operating profit to total revenue. The calculation formula is as follows: Operating Profit Margin = Operating Profit ➗ Total Revenue Operating Profit = Total Revenue – (Cost of Sales + Operating Cost) In the same example above, the sales cost of a shirt is $10/piece, and there will also be advertising, management fees and other expenses during the sales process, such as $5/piece. Then, its operating profit margin is Operating profit margin = ($25 – $10 – $5) / $25 = 40% net profit margin Net profit margin, also known as "net profit margin", in English is Net Profit Margin, which refers to the ratio of a company's net profit to total revenue. Its calculation formula is as follows: Net profit margin = Net profit ➗ Total revenue Among them, net profit (Net Profit) refers to the remaining profit after deducting all expenses, such as taxes, interest on debt issued, etc., from total income. Net profit is the most important of all profit measures and the most commonly used one. Using the previous example again, after making a profit from the sale of a shirt, the company also needs to pay other expenses, such as taxes, dividends from the issuance of preferred stock, and other expenses, totaling $5. The net profit margin at this time is: Net profit margin = ($25 – $10 – $5 – $5) / $25 = 20% What role does profit margin play in analyzing company fundamentals? Profit rate is an important indicator of a company's profitability and can reflect key information such as its financial health, operating efficiency and profitability. Gross profit margin: reflects the company's gross profit after deducting the cost of sales. A high gross profit margin indicates that the company is highly competitive in pricing its products or services. Operating profit margin: Indicates a company's profitability after deducting all operating costs. High operating margins generally mean a business is operating more efficiently. Net profit margin: Shows a company's net profit after deducting all expenses and taxes. A high net profit margin indicates that the company can ultimately create more net profits for shareholders. At the same time, profit margins can be used to compare the operating performance of different companies in the same industry. A profit margin that is higher than the industry average may indicate that the business has a competitive advantage in the market. What is an appropriate profit margin for a listed company? When using profit margins to analyze a company's operations, you need to note that profit margins only make sense when compared between companies of the same type.
Because companies in different industries have different operating models, the costs and expenses incurred will be very different, resulting in a large gap in profit calculation, and the meaning of comparing company values with each other is lost. The net profit margin and gross profit margin of various industries are as follows: Number of companies in the industry Gross profit margin Net profit margin Advertising5728.11%0.89% Aerospace/Defense7017.27%4.96% Air Transport2525.80%2.79% Apparel3851.93%3.15% Auto & Truck3412.45%3.53% Auto Parts3915.01%1.62% Bank (Money Center)15100.00%30.89% Banks (Regional)62599.36%29.67% Beverage (Alcoholic)1945.25%8.59% Beverage (Soft)2954.52%13.73% Broadcasting2238.57%-1.41% Brokerage & Investment Banking2762.06%12.44% Building Materials4430.94%8.00% Business & Consumer Services16233.50%5.45% Cable TV1059.05%10.69% Chemical (Basic)3213.75%3.52% Chemical (Diversified)418.18%-1.01% Chemical (Specialty)6833.13%10.93% Coal & Related Energy1834.60%15.80% Computer Services7225.52%4.40% Computers/Peripherals3637.54%17.47% Construction Supplies4524.94%10.17% Diversified2328.22%15.84% Drugs (Biotechnology)57256.37%-11.88% Drugs (Pharmaceutical)24565.26%15.20% Education3144.23%1.30% Electrical Equipment10332.52%15.22% Electronics (Consumer & Office)1332.36%-3.05% Electronics (General)12927.36%4.69% Engineering/Construction4313.85%1.67% Entertainment9838.09%-0.23% Environmental & Waste Services5734.65%8.09% Farming/Agriculture4216.49%7.12% Financial Svcs. (Non-bank & Insurance)17265.99%15.44% Food Processing8224.53%6.00% Food Wholesalers1414.86%1.21% Furn/Home Furnishings3126.04%-2.24% Green & Renewable Energy1761.67%15.26%
Healthcare Products23055.64%8.19% Healthcare Support Services11914.37%2.25% Healthcare Information and Technology12847.67%5.72% Homebuilding3225.06%12.27% Hospitals/Healthcare Facilities3235.99%5.12% Hotel/Gaming6859.52%10.08% Household Products9348.70%11.08% Information Services1832.72%3.49% Insurance (General)2133.93%8.88% Insurance (Life)2320.49%0.72% Insurance (Prop/Cas.)5023.43%5.00% Investments & Asset Management33466.89%19.82% Machinery10335.54%9.77% Metals & Mining6831.13%7.23% Office Equipment & Services1735.33%0.81% Oil/Gas (Integrated)437.33%12.40% Oil/Gas (Production and Exploration)16658.75%28.26% Oil/Gas Distribution2452.91%23.59% Oilfield Svcs/Equip.10014.09%6.22% Packaging & Container2221.71%2.85% Paper/Forest Products720.20%3.86% Power5037.41%8.51% Precious Metals6132.47%-4.26% Publishing & Newspapers2145.99%1.82% R.E.I.T.19357.48%12.61% Real Estate (Development)1732.20%-16.35% Real Estate (General/Diversified)1146.70%16.91% Real Estate (Operations & Services)6034.10%-3.14% Recreation5536.73%0.90% Reinsurance115.72%6.36% Restaurant/Dining6432.43%10.66% Retail (Automotive)3021.88%4.32% Retail (Building Supply)1634.17%8.40% Retail (Distributors)6232.34%7.55% Retail (General)2630.86%3.09% Retail (Grocery and Food)1425.54%1.18% Retail (REITs)2877.63%23.32% Retail (Special Lines)10529.88%1.45% Rubber& Tires316.56%-2.53% Semiconductor6351.72%16.47%
Semiconductor Equip3044.27%17.94% Shipbuilding & Marine825.44%7.75% Shoe1345.36%9.49% Software (Entertainment)8463.43%20.35% Software (Internet)3559.11%-14.32% Software (System & Application)35171.52%19.14% Steel2919.30%9.25% Telecom (Wireless)1361.35%8.79% Telecom. Equipment6655.56%13.98% Telecom. Services4258.24%-0.28% Tobacco1661.25%27.52% Transportation3625.12%5.96% Transportation (Railroads)449.76%23.52% Trucking2221.95%5.37% Utility (General)1440.55%13.51% Utility (Water)1355.50%19.34% Total Market648136.56%8.54% Total Market (without financials)521433.41%7.59% Source: New York University In general, to evaluate the profit margin of a specific company, it is necessary to compare it within the industry. For different companies in the same industry, better profit margins indicate that the company has better ability to control costs. At the same time, profit margins for startups may be lower because startups continue to increase investments. But once it passes the start-up period and enters a good and stable operating state, the company's profit margins may rise rapidly. How to check the profit margin of a listed company? 1. Using TradingView TradingView is a comprehensive financial market analysis platform that integrates all investment-related data and information. When querying analysis data about stocks, just enter the company name or stock code in the search box on the homepage. Search Apple Inc. (AAPL) Type "AAPL" into the search bar at the top of the home page and press Enter. Find Apple Inc.'s stock symbol (AAPL) in the drop-down list that appears, place the mouse on it, and click "See overview". View company profile Once on Apple Inc.'s stock page, click on the "Financials" tab in the menu at the top of the page. On the "Financials" page, you will see various financial data about the company. View profit margins On the Financials page, select the Statistics tab. In the Statistics tab, you can find various financial ratios, including Gross Margin, Operating Margin, and Net Profit Margin. 2. Query in the broker software Common brokers include Interactive Brokers, Moomoo, Robinhood, Fidelity, etc. You can find information such as profit margins on these brokers. In this article, we will demonstrate how to find profit margins at Interactive Brokers. Find Apple Inc. (AAPL)
After logging into Interactive Brokers, enter the trading platform (online platform, Client Portal or Trader Workstation). Use the search bar to enter "Apple" or "AAPL" to find Apple Inc. stock. View company fundamental information After selecting the Apple Inc. stock, go to its details page. On the stock details page, find and click on the “Fundamentals” option. Find profit margin data On the "Fundamentals" page, click "Key Ratios" and look for options related to profit margins. Scroll to view the following profit margins: Gross Profit Margin: Shows the company's profitability after deducting the cost of sales. Operating Profit Margin: Shows the company's profitability after deducting operating expenses. Net Profit Margin: Shows the company's final profitability after deducting all expenses. Through the above steps, you can easily find various profit margin data of Apple Inc. and perform detailed analysis. FAQ