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Net Margin

Net margin is a profitability metric that shows what proportion of revenue is accounted for by net income.

Net Margin (%) = Net Income ÷ Revenue × 100

What It Measures

Net margin is a metric that shows what proportion of revenue is accounted for by the final profit figure (net income), which includes taxes and extraordinary gains and losses. It expresses how much profit ultimately accrues to shareholders across a company's overall activities.

How to Interpret It, and Points of Caution

Because net income is prone to being affected by extraordinary gains and losses, such as gains or losses on the sale of fixed assets or losses from disasters, net margin can fluctuate significantly from year to year. It is common to check it together with operating margin and ordinary income margin, and to assess whether any fluctuation reflects a one-off factor or a structural change.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

Can net margin alone tell you a company's earning power?
Net margin is prone to being affected by one-off factors such as extraordinary gains and losses, so it is not appropriate to judge earning power based on this figure alone. It is common to check it together with operating margin and ordinary income margin.
Is there a benchmark level for net margin?
Levels vary greatly by industry, so no single figure applies universally. Comparing against peers in the same industry and checking past trends can be useful reference points.

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