Gross, operating & net margin
A margin is profit as a share of revenue, and the income statement offers three useful cuts. Gross margin is what’s left after the direct cost of producing what was sold. Operating margin also subtracts the cost of running the business — selling, R&D, overhead. Net margin is the bottom line: what remains after everything, including interest and tax.
Each answers a different question. Gross margin asks: does the product itself command a premium? Operating margin asks: does the company turn that premium into profit efficiently? Net margin asks: what do shareholders actually keep? A fat gross margin with a thin operating margin often means heavy spending to defend the franchise — worth knowing either way.
How the Moat Index measures this
The pricing-power sub-score — 30% of the Moat Score — is built on gross margin’s level and stability over up to ten years of SEC filings, because a high, steady gross margin is the cleanest fingerprint of a moat: it means the business holds its price without losing customers. Gross margin is charted year by year on company pages — operating and net margin sit alongside it in the fundamentals table there — with unreported years shown as gaps, never interpolated. One honest caveat: for banks, “margin” usually means net interest margin — a measure we don’t compute, because financials sit outside the scoring model.