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Metric · Margin

Return on Sales (Net Margin) Explained

Q: What is a good net margin?

As a rough guide, above 10% counts as strong and below 4% as weak. The industry-typical norm varies considerably between, e.g., retail and software.

Q: What is the difference between net margin and EBIT margin?

EBIT margin shows operating earnings power before interest and taxes, net margin shows what actually remains afterward. The gap between the two reflects financing costs and tax burden.

Return on sales (also net margin) relates net income to revenue. It shows how many cents of every euro of revenue actually remain as profit, after all costs, interest and taxes.

Updated 20266 min read

Formula

Net margin = Net income ÷ Revenue × 100

> 10%Strong net margin

4–10%Moderate net margin

< 4%Weak net margin

Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator

Net income

The after-tax profit from the income statement.

Denominator

Revenue

Revenue from the core operating business.

Net margin calculator

Enter your own figures and see the value instantly.

Net income (€m)

Revenue (€m)

Result net margin

Moderate net margin

8.0%

A net margin above 10% is considered strong in many industries and points to an efficient, low-cost-intensity business model.

A margin below 4% is often normal in low-margin industries (e.g. retail), but a warning sign in margin-rich ones.

Unlike EBIT margin, net margin also reflects interest expense, taxes and one-off items. It's the 'last step' of the margin cascade.

Typical industry ranges

Typical value range per sector, for orientation.

Real Estate

12.6–56.2%

Financial Services

10.8–26.1%

Technology

6.5–24.2%

Utilities

6.8–17.1%

Energy

7.3–19.8%

Basic Materials

4.3–22.2%

Healthcare

5.0–18.4%

Communication Services

3.2–16.0%

Industrials

5.6–13.1%

Consumer Cyclical

4.1–13.0%

Consumer Defensive

2.9–10.0%

Aggregated sector values (median band). Data as of Nov 15, 2026

Threshold slider

How many sectors meet a threshold?

Move the threshold and see how many of the sectors shown above sit below or above it with their median.

Bounded preview

Threshold for Net margin10.8%

Comparison

6 of 11 sectors meet the thresholdBased on the aggregated sector medians above, not on individual companies.

What the metric looks like at large companies

Data as of Nov 15, 2026

Name	Sector	Value	Sector median
Apple Inc.	Technology	27.6%	14.4%
Alphabet Inc Class A	Communication Services	50.0%	10.1%
Amazon.com Inc	Consumer Cyclical	16.9%	7.1%
Space Exploration Technologies Corp. Class A Common Stock	Industrials	-26.4%	8.7%
Saudi Aramco	Energy	23.2%	10.8%
Eli Lilly and Company	Healthcare	31.9%	10.6%

Selection: the company with the highest market cap in each sector. Not a recommendation, only worked examples with real values.

Used in these strategies

Magic Formula: Value + QualityGood companies at cheap prices: two factors, one score.Dividend Quality: 4 FactorsFour factors against the dividend trap: continuity, coverage, yield, growth.

Frequently asked questions

What is a good net margin?

As a rough guide, above 10% counts as strong and below 4% as weak. The industry-typical norm varies considerably between, e.g., retail and software.

What is the difference between net margin and EBIT margin?

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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.