§ 01
| Ratio | Formula | What It Tells You |
|---|---|---|
| Gross Margin | Gross Profit / Revenue | Profitability after direct costs (materials, labor) |
| Operating Margin | Operating Income / Revenue | Profitability after overhead (rent, salaries, R&D) |
| Net Margin | Net Income / Revenue | Bottom-line profitability after everything |
§ 02
Net Margin = Net Income / Revenue
§ 03
Margins vary wildly by industry. Software companies often have 20-30% net margins. Grocery stores operate on 1-3%. Always compare within the same sector.
§ 04
Look up any ticker and find the **margin metrics**. Then compare to the sector median shown alongside.
§ 05
Company A has $500M revenue and $50M net income. Company B has $100M revenue and $25M net income. Which is more efficient?
§ 06
Five questions · AI feedback
Sit with the ideas.
Company A has 80% gross margin and 20% net margin. Company B has 30% gross margin and 15% net margin. Which company likely has higher operating expenses relative to revenue?
Why:
Try this in paper trading
Buy the cheaper of two competitors
Pick a sector you understand — coffee, banks, semis. Find two competitors. Compare their P/E ratios. Paper-buy the cheaper one and write a thesis explaining why the market might be wrong (or right) about the discount.
Open paper portfolio →Practice mode — simulated trades, not investment advice.