Operating Margin

What is the Operating Margin?

Operating margin shows how much of each rupee of sales survives as operating profit after paying the costs of running the business, before interest and tax.

How to interpret it

Higher and stable operating margins point to pricing power and cost discipline. Expanding margins over time are a strong quality signal; contracting margins warn of competition or cost pressure.

What’s a good Operating Margin?

Varies by industry — software firms may exceed 25–30%, while low-margin retail runs in single digits. Compare within a sector and track the trend.

Common mistakes

• Comparing margins across unrelated industries.
• Confusing operating margin with net margin (which is after interest and tax).