Operating Margin

Operating Margin measures the proportion of a company's revenue that remains as operating profit after deducting all operating expenses — including cost of goods sold, wages, rent, and depreciation — but before accounting for interest payments and taxes. It is calculated as: Operating Margin = Operating Profit (EBIT) ÷ Revenue × 100. A higher operating margin indicates a more efficient business with greater pricing power and cost discipline. Operating margin is particularly useful for comparing profitability across companies within the same sector. In India, tracking operating margin trends over multiple quarters is a key part of fundamental analysis — margin expansion typically signals improving unit economics, while margin compression can be an early warning of rising input costs or pricing pressure.