Operating Margins
13 days ago
- #financial-data
- #business-analysis
- #operating-margin
- Operating margin is calculated by dividing a company's income by its revenue, indicating the percentage of cash left after sales.
- Median and weighted average operating margins vary significantly across business categories, with some like Semiconductors showing a median of 10% but a weighted average of 42% due to large outliers.
- Highly regulated monopolies such as Toll Road Operators, Stock Exchanges, and Ports have exceptionally high average margins (49%).
- Industries like AI, Networking Hardware, and Semiconductors show high margins for dominant players due to high capital barriers to entry.
- Pizza and Beverages categories have surprisingly high margins (20% and 29% respectively), often due to franchising or low raw material costs.
- Country-level data shows wide discrepancies in margins, with South Africa and Indonesia leading in average margins, while Israel has negative average margins due to many unprofitable startups.
- Accounting standards like GAAP in the US may lead to lower median margins compared to IFRS used in other countries.
- The article highlights the importance of understanding margins for business strategy and identifies high-margin industries and outliers.