Q: What is a good operating profit margin?
A: Software: 20-40%. Financials: 25-45%. Consumer staples: 10-20%. Retail: 3-8%. Airlines: 5-15%. Higher is better within a peer group, but the absolute level depends on industry structure.
Operating Profit Margin
CategoryMargin Metrics
Definition
Operating profit margin measures the percentage of revenue remaining after subtracting both the direct cost of goods sold and all operating expenses — including sales, general and administrative expenses, research and development, and depreciation. It is calculated by dividing trailing twelve-month operating income by trailing twelve-month revenue.
Operating margin shows how much profit the company's core business operations generate before interest expense and taxes. It is a better measure of operational efficiency than gross margin because it includes all the costs of running the business, not just production costs.
Formula
Operating Profit Margin = Operating Income (TTM) / Revenue (TTM)
How GeminIQ calculates this metric
GeminIQ divides TTM operating income by TTM revenue, both from SEC filings.
FAQ
Q: How does operating margin differ from net profit margin?
A: Operating margin measures profit before interest and taxes. Net profit margin measures profit after all expenses including interest, taxes, and non-operating items. The gap between the two reveals how much of the company's profit is consumed by financing costs and taxes.
Q: Why might operating margin differ between platforms?
A: Platforms may define operating income differently — some include non-recurring charges, others exclude them. Some aggregators reclassify items between operating and non-operating categories. GeminIQ uses Operating Income as reported in the filing.
Further Reading: Gross Profit Margin: What It Reveals About Business Model Strength
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