Net margin

Net margin divides bottom-line net income by revenue. It is the most-cited profitability ratio in headlines because it is the simplest, but it is also the most distorted by capital structure, tax-rate variability, and one-time items below the operating line. A business that takes a large goodwill impairment in a single year will show a depressed net margin that says nothing about run-rate operations; a business with an unusually low effective tax rate (driven by international structuring, R&D credits, or one-time benefits) will show an inflated net margin that will not persist. We use operating margin as the primary profitability lens and net margin as a sanity check, taking care to normalize for non-recurring items and tax-rate anomalies. For peer comparisons, EBITDA margin (which strips out depreciation as well) is often more informative because it neutralizes capital-intensity differences across firms.