Operating Margin

Operating margin is operating profit as a share of revenue. Sell 1 billion and keep 100 million in operating profit and the margin is 10%. It measures not how much you sell but how much of it you keep.

A high margin means one of two things: pricing power, or making the same product more cheaply than rivals. Either way it signals a favourable competitive position.

Normal ranges differ enormously by industry, so absolute comparisons are meaningless. Retail and construction often run in single digits while software can reach 20 to 30%. Compare against direct competitors.

The trend matters more than any single year. Revenue rising while margin steadily falls suggests volume bought with discounts, or costs slipping out of control. It is a measure of the quality of growth. A high margin paired with a low share price often means the market doubts the margin will last, and that gap is usually worth investigating.