GLOSSARY // Fundamentals
Net Margin
Net margin is net income as a percentage of revenue — the share of every sales dollar that survives all the way to the bottom line after every cost, including interest and taxes. A company earning $30M on $200M of revenue runs a 15% net margin.
It is the strictest of the three margin measures, and the noisiest: one-time charges, tax quirks, and debt costs all land here. That makes the multi-year trend more informative than any single quarter.
Net margin also sets what a price-to-sales multiple is worth. A company at 20% net margin turns $1B of revenue into $200M of profit; one at 2% turns the same revenue into $20M. Same top line, ten times the earnings.
A company reports $200M in revenue and $30M in net income: net margin = 30 / 200 = 15%. Its competitor does $400M in revenue with $24M in net income — twice the sales, but a 6% margin, and $6M less actual profit.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.