Pretax margin measures the percentage of revenue remaining as profit before income taxes are applied. It divides pretax income by revenue. This metric isolates operational and financing profitability from the effects of tax strategy, making it useful for comparing companies in different tax jurisdictions or with different tax structures.
Pretax Margin = Pretax Income (TTM) / Revenue (TTM)
GeminIQ divides TTM pretax income by TTM revenue, both from SEC filings.
A: Pretax margin is more useful when comparing companies with different effective tax rates — for example, a US-based company versus one with significant international operations and lower blended tax rates. It strips out tax differences and shows the underlying profitability before tax optimization.
A: Pretax margins typically run 1-5 percentage points above net margins, depending on the company's effective tax rate. A 20% effective tax rate on a 25% pretax margin produces a 20% net margin. Compare against the same industry peers.
A: Differences in how pretax income is classified — particularly treatment of non-operating gains and losses — are the main source. GeminIQ uses Pretax Income as reported.