Profitability
Net Margin
Net margin is the share of revenue that remains as profit after every cost, including interest and tax.
Net margin is the bottom line as a percentage. It is what ultimately feeds EPS. It is also the margin most affected by one-off gains, tax credits, and interest. A jump in net margin that does not show up in operating margin is often a financing or tax event, not a better product.
Use net margin to see the whole funnel, and operating margin to see the business. A company with a strong operating margin and a weak net margin is often carrying a heavy interest bill. That is a balance-sheet story, and it belongs with debt-to-equity, not with a pep talk about the brand.
Formula
Net margin = net income ÷ revenue
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Questions
Which margin does the P/E care about?
P/E is built on net income, so net margin and share count are what turn revenue into the earnings in the ratio.
Are negative margins a sell?
They are a fact. Early-stage firms and cyclicals at the bottom print losses. The question is whether the path to a positive margin is funded and plausible.