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
Live example
Apple Inc. (AAPL) last printed at $345.33 with a market cap of $5.04T. Apply the formula on this page to that live price. Where the quote is missing an input, the stock page's financials are the next place to read it.
Related
Operating Margin · Earnings Per Share (EPS) · Interest Coverage
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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.