Step 4 of 11
How to look at profitability
How much of what the company sells turns into profit?
Click any Tap any word with a dotted underline to see what it means.
Revenue shows how much a company sells. Profitability shows how much of that it keeps after paying its costs.
What to look at
- : the profit left after all costs, interest and taxes. Is it positive, and how has it changed?
- : the share of revenue that becomes profit, which lets you compare companies of different sizes.
- In the Advanced View: , what's left after the direct costs of making the products, and , profit compared with the money invested in the business.
Questions to ask yourself
- Are margins stable, rising or falling over the years? What might explain the change?
- How do they compare with other companies in the same sector? Industries have very different typical margins.
- Was there a one-time gain or loss that makes one year look unusual?
Keep in mind
A company that isn't profitable yet can still be building something valuable, and a very profitable company can still face problems ahead. Profitability describes the past; it doesn't guarantee the future.
On StockLab
Net Income and Net Profit Margin are in the Simple View. Gross Margin and ROIC are in the Advanced View, each with the previous year and the sector median.