Margin Pressure

DEFINITION of 'Margin Pressure'

A financial term for the effect of certain internal or market forces on a company's gross, operating or net margins. If something happens to make a company's costs rise or revenues fall, margins will become compressed, reducing net earnings.

Things that can cause margin pressure include:

1. When a new competitor enters the business and increases its product offering or lowers its costs
2. When commodity costs rise or other costs within the supply chain are rising
3. When increased regulatory controls are imposed on the company or industry
4. When new legislation is introduced that fundamentally changes the markets in which the company competes
5. When internal production problems or delays arise
6. When rising selling, general and administrative expense (SG&A) costs occur without a proportional rise in revenue

BREAKING DOWN 'Margin Pressure'

Margin pressure can be related to macroeconomic events, such as rising oil prices, or company-specific events, such as a loss of market share. Investors expect margins to fluctuate over time, but severe margin pressures, or those that could exist for a long time, will usually drag down a stock even in advance of an actual earnings decline.

RELATED TERMS
  1. Profit Margin

    Profit margin is part of a category of profitability ratios calculated ...
  2. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company ...
  3. Marginal Profit

    Marginal profit is the profit earned by a firm or individual ...
  4. Operating Margin

    A ratio used to measure a company's pricing strategy and operating ...
  5. Margin Debt

    1. The dollar value of securities purchased on margin within ...
  6. Gross Profit Margin

    A financial metric used to assess a firm's financial health by ...
Related Articles
  1. Markets

    A Look At Corporate Profit Margins

    Take a deeper look at a company's profitability with the help of profit margin ratios.
  2. Professionals

    Goals Of Financial Management

    Find out the goals that all businesses have in common.
  3. Options & Futures

    Margin Trading: Conclusion

    Here's the bottom line on margin trading: You are more likely to lose lots of money (or make lots of money) when you invest on margin. Now let's recap other key points in this tutorial: ...
  4. Professionals

    The Income Statement: Key Ratios - Profit and Operating Margin

    FINRA/NASAA Series 65 - The Income Statement: Key Ratios - Profit and Operating Margin. In this section key ratios: profit margin, operating margin, interest coverage ratio, price earning ratio ...
  5. Entrepreneurship

    How Gross Margin Can Make or Break Your Startup

    Find out how your startup's gross margin can impact your business, including why a mediocre margin may spell disaster for a budding business.
  6. Term

    The Difference Between Gross and Net Profit Margin

    To calculate gross profit margin, subtract the cost of goods sold from a company’s revenue; then divide by revenue.
  7. Economics

    What is Net Margin?

    The ratio of net profits to revenues for a company that shows how much of each dollar earned by the company is translated into profits.
  8. Markets

    Intermediate Guide To E-Mini Futures Contracts - Margin

    Margin is essentially a loan that a brokerage firm extends to a client (the trader or investor) that is used for the purchase of trading instruments. Margin trading allows traders and investors ...
  9. Entrepreneurship

    What’s a Good Profit Margin for a New Business?

    Surprisingly, the younger your company is, the better its numbers may look.
  10. Options & Futures

    Margin Trading: What Is Buying On Margin?

    The Basics Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able ...
RELATED FAQS
  1. What's the difference between profit margin and operating margin?

    Find out the differences between a company's gross profit margin, net profit margin and operating margin, and what each metric ... Read Answer >>
  2. What is the difference between operating margin and profit margin?

    Understand the difference between operating margin and profit margin in relation to evaluating a company's profitability ... Read Answer >>
  3. What types of financial margins should investors pay the most attention to before ...

    Learn what types of financial margins, such as profit and cash margins, an investor should pay the most attention to before ... Read Answer >>
  4. What is the difference between gross margin and profit margin?

    Understand the difference between gross margin and profit margin, and learn about the profitability ratios used in evaluating ... Read Answer >>
  5. How does a company make a spending decision using marginal analysis?

    Understand how a company uses marginal analysis in its spending decisions. Learn the benefits of marginal revenue and marginal ... Read Answer >>
  6. What is the difference between operating margin and contribution margin?

    Understand the difference between two measures of profitability, operating margin and contribution margin, and the purpose ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center