Glossary / Fundamentals
Profit margin
Also called: net margin · gross margin · operating margin
Profit margin is profit expressed as a share of revenue. Which profit is used defines which margin it is: gross margin uses revenue minus the direct cost of goods, operating margin subtracts operating expenses as well, and net margin is what remains after interest, tax and everything else.
How it is measured
How is profit margin measured?
Divide the relevant profit line from the income statement by revenue for the same period. All three versions come from the same filed statement, so all three refresh on filing cadence rather than continuously, and all three are restated when the underlying financials are.
Why it matters
Why does profit margin matter to a swing trader?
The three levels answer different questions, and reading the wrong one is the common error: gross margin describes the economics of the product itself, operating margin describes the business built around it, and net margin describes what the capital structure and tax position leave behind. Margins are only comparable within an industry — a software company and a grocer operate at structurally different levels for reasons that have nothing to do with how well either is run. The direction of a margin over several periods usually carries more information than its level in any one.
In Tapeline
Does Tapeline use profit margin?
Profit margin is one of the five inputs to Tapeline's Fundamentals factor. The factor is not sector-relative, which the methodology page states as a known limitation.
Tapeline publishes the six factor names and the ordering of their weights. The numeric weights, the scoring equation and the band edges are not published.
Related
See this in the product
What the Fundamentals factor measures · The Fundamentals factor · Full methodology
Related terms
Back to the full glossary.
General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.