Net Profit Margin

Loading the player...

What is 'Net Profit Margin'

Net margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage – that shows how much of each dollar earned by the company is translated into profits. Net margins can generally be calculated as:

 

Net Margin

 

BREAKING DOWN 'Net Profit Margin'

Net margins will vary from company to company, and certain ranges can be expected from industry to industry, as similar business constraints exist in each distinct industry. A company like Wal-Mart has made fortunes for its shareholders while operating on net margins less than 5% annually, while at the other end of the spectrum some technology companies can run on net margins of 15-20% or greater.

Most publicly traded companies will report their net margins both quarterly (during earnings releases) and in their annual reports. Companies that are able to expand their net margins over time will generally be rewarded with share price growth, as it leads directly to higher levels of profitability.

 

RELATED TERMS
  1. Profit Margin

    Profit margin is part of a category of profitability ratios calculated ...
  2. After-Tax Profit Margin

    A financial performance ratio, calculated by dividing net income ...
  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 Pressure

    A financial term for the effect of certain internal or market ...
  6. Margin Debt

    1. The dollar value of securities purchased on margin within ...
Related Articles
  1. Investing

    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.
  2. Investing

    A Look At Corporate Profit Margins

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

    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.
  4. Investing

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

    Surprisingly, the younger your company is, the better its numbers may look.
  5. Investing

    What's a Good Profit Margin for a Mature Business?

    How to determine if the amount you clear dovetails with the competition.
  6. Investing

    Calculating Net Interest Margin

    Net interest margin is a metric used to measure the effectiveness of a company’s investment decisions, particularly financial institutions.
  7. Investing

    4 Tips to Evaluate Growth Companies (KO, AAPL)

    Discover the best metrics for stock investors to utilize when selecting and evaluating the best opportunities in growth investing.
  8. Investing

    Value Investing: Finding Value In Income Statements

    A company's income statement basically tells you how much money it has taken in and how much it has paid out over a year or a quarter. Looking at the annual income statement rather than a quarterly ...
  9. Investing

    What Is the Best Measure of a Company's Financial Health?

    Discover the single best financial metric that investors can use for determining the financial health and long-term sustainability of a company.
  10. Investing

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
RELATED FAQS
  1. Should I look at a company's operating profit or net profit?

    Explore the ways in which investors and market analysts use a company's operating profit and net profit margins for equity ... Read Answer >>
  2. What is the difference between gross profit margin and net profit margin?

    Understand the difference between the two profitability measures, gross profit margin and net profit margin, and how to calculate ... Read Answer >>
  3. What net interest margin is typical for a bank?

    Find out what kind of net interest margin is typical for banks or other financial institutions, and why net income margin ... 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. 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 >>
  6. What are some examples of factors that will affect my profit margin?

    Dive into profit margin, and discover some of the many factors that can influence the profit margin for your company in a ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center