Operating Margin Definition & Meaning | Fundamental Analysis | CSIMarket
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Glossary

Operating Margin

Fundamental Analysis

Operating Margin is a financial metric that measures the profitability of a company*s core operations. It shows the percentage of revenue that remains after subtracting all of the operating expenses, including cost of goods sold, depreciation, amortization, and salaries.

Operating Margin is important for investors because it provides insights into the efficiency of a company*s operations. A high Operating Margin indicates that a company is generating profits from its core business, whereas a low Operating Margin suggests that a company may be facing operational challenges or inefficiencies.

Operating Margin is used extensively in fundamental analysis, a method of evaluating a company*s intrinsic value based on financial and economic data. By comparing a company*s Operating Margin to its competitors or industry average, investors can determine whether the company is performing well or poorly relative to its peers.

The formula for Operating Margin is:

Operating Margin = Operating Income / Revenue

In this formula, Operating Income is calculated by subtracting all operating expenses from revenue. The resulting number is then divided by revenue and expressed as a percentage.




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