Net Margin 12 months – Most Recent (%) greater than equal to 0: High net profit margin indicates solid profitability. The Winning StrategyĪ healthy net profit margin and solid EPS growth are the two most sought-after elements in a business model.Īpart from these, we have added a few criteria to ensure maximum returns from this strategy. In such cases, the measure is rendered ineffective, while analyzing a company’s performance. In addition, the difference in accounting treatment of various items - especially non-cash expenses like depreciation and stock-based compensation - makes comparison a daunting task.įurthermore, for companies preferring to grow with debt instead of equity funding, higher interest expenses usually weigh on net profit. While net income is a key metric for investment measurement in traditional industries, it is not that important for technology companies. The metric varies widely from industry to industry. However, net profit margin as an investment criterion has its share of pitfalls. Hence, a strong net profit margin is preferred by all classes of investors. Net profit margin helps investors gain clarity on a company’s business model in terms of pricing policy, cost structure and manufacturing efficiency. Moreover, a higher net profit margin compared with its peers provides the company with a competitive edge. Further, strength in the metric not only attracts investors but also draws well-skilled employees who eventually enhance a business's value.

In fact, the net profit margin can turn out to be a potent point of reference to gauge the strength of a company’s operations and its cost-control measures.Īlso, higher net profit is essential for rewarding stakeholders. In simple terms, net profit is the amount a company retains after deducting all costs, interest, depreciation, taxes and other expenses. Net Profit Margin = Net profit/Sales * 100. ( HHS Quick Quote HHS - Free Report) boast solid net profit margins. ( AZZ Quick Quote AZZ - Free Report) and Harte Hanks, Inc. ( JBL Quick Quote JBL - Free Report), Target Hospitality Corporation ( TH Quick Quote TH - Free Report), AZZ Inc. In order to gauge the extent of profits, there is no better metric than net profit margin.Ī higher net margin reflects a company’s efficiency in converting sales into actual profits.

Investors prefer to put their money in businesses that reap profits on a regular basis.

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