Net Margin
The share of revenue left as profit after subtracting all costs (operating, interest, taxes).
Net Margin = Net Income ÷ Revenue × 100
The higher the net margin, the better revenue carries through to final profit.
In plain terms
Net margin looks at what percentage of revenue is left as profit after all costs are subtracted — core business costs, of course, plus interest, taxes, and one-time gains and losses, all settled up.
If operating margin is "what's left from the core business," net margin is "what's truly left at the very end after everything." That's why it's usually lower than operating margin.
Where operating margin stops at the core business, this is what remains after interest and taxes too. For this same company 20% becomes 15%.
One-off events — a gain from selling an asset, a legal settlement — can swing this figure for that year alone.
The figures belong to a made-up company, Example Inc. Every picture in this glossary uses the same company, so you can see how the metrics connect.
What it tells you
Net margin is the share of final profit that can actually go to shareholders. Since EPS, PER, and ROE are all calculated from this net income, net margin is the starting point for the other profitability metrics.
Looking at the gap between operating margin and net margin gives a sense of how much interest (debt burden), taxes, and non-core gains and losses ate into or added to profit.
Formula
Net Margin = Net Income ÷ Revenue × 100
What high or low means
The higher the net margin, the better revenue carries through to final profit.
If the operating margin looks fine but the net margin is unusually low, it can signal heavy interest costs (debt burden), or large taxes or one-time losses.
Net income is the number most easily swung by one-off items. Things unrelated to the core business — gains from selling assets, litigation settlements, tax refunds — can mix in and make a single quarter jump. The strength of the core business shows in the operating margin, and the trend shows across several quarters.
Taxes vary by country, period, and tax breaks, so the net margin can shift from a temporary change in tax rate alone.
If a high net margin came not from an improving core business but from a one-time item (for example, a book valuation gain on an asset held), it may disappear next quarter. So the same net margin can mean different things depending on where it came from.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Net alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.