Operating Margin
The percentage of revenue remaining after all operating expenses (COGS, SGA, R&D) but before interest and taxes.
Formula
Operating Margin = (Operating Income / Revenue) × 100
How to Interpret
A high operating margin means the company runs efficiently. The largest software and internet platforms often have 30-40% operating margins. It excludes financial engineering (interest, taxes) so it reveals core business performance.
Why It Matters
Operating margin shows how well management controls costs. Two companies with similar revenue can have wildly different operating margins — the gap reveals operational discipline and business quality.
R40 does not publish Operating Margin per company. This entry explains the measure; the metrics R40 tracks and ranks are listed on the indicators index.