Stock Meadow · Metric glossary · Profitability
Operating Margin: formula and how to read it
Operating margin shows how much of each sales dollar remains as profit from running the business, before interest and tax.
What is Operating Margin?
Share of sales left after running the business. Trailing operating income divided by revenue.
Stock Meadow groups it under Profitability, and shows it in tables as Op. margin.
Formula and a worked example
Operating margin = operating income ÷ revenue over the trailing twelve months
A company with $500 million of revenue and $75 million of operating income has an operating margin of 15%. The numbers are made up for illustration.
How to read it
A higher operating margin means the core business keeps more of each sales dollar. Rising margins can signal efficiency or pricing power; falling margins can warn of cost pressure.
When Stock Meadow ranks stocks, a higher figure scores better.
Common pitfalls
- Margins vary widely between industries, so comparing across sectors misleads.
- One-off charges and gains in operating income can distort a single year.
- Banks and insurers do not report operating profit in this form, so it is blank for them.
How Stock Meadow handles gaps. Usually blank when the company doesn't report operating profit.
Treat any single metric as one clue, and read the company's financial statements before drawing a conclusion. Stock Meadow's figures are research tools based on reported data, not investment advice.
Stock Meadow models that use it
In Weighted ranking, Z-score composite and Balanced (no weak link), you choose the metrics and weights yourself, so you can include it in a custom score.
No fixed-recipe model scores it.
Read about every scoring model on the scoring models page.
Frequently asked questions
- What is the difference between gross margin and operating margin?
- Gross margin only subtracts the direct cost of producing the goods or services. Operating margin also subtracts running costs such as selling, marketing, research and administration.
- Is a higher or lower Op. margin better?
- When Stock Meadow ranks stocks, a higher figure scores better. That is a ranking convention, so read Op. margin alongside other measures and compare similar companies.
- Why is Op. margin blank for some stocks?
- It is usually blank when the company doesn't report operating profit. Stock Meadow leaves the figure blank rather than guessing it.
Use Op. margin in Stock Meadow
Filter on Operating margin (TTM), score it in your own screen, and see how every stock compares. Free during the preview.
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