What Is a Good Operating Margin?


Quick Answer

While operating margins vary drastically between industries, operating margins between the 10 and 15 percent mark tend to be very good, but for some industries such as entertainment, good operating margins are well above 20 percent, according to NYU. A complete list of average operating margins by sector can be found on the New York University website, and any number above the average of each industry would be considered a good operating margin.

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Full Answer

The operating margin is a measurement of how much profit a company makes for every dollar in revenue, according to Investopedia. For instance, if a company has a 10 percent operating margin, it makes 15 cents profit for every dollar it earns in revenue.

Sectors such as beverage sales and entertainment have average operating margins of around 20 percent, while the office equipment and newspaper industries only have averages of around 7 percent, which means a 10 percent operating margin would be great for an office supply company but awful for an alcoholic beverage company.

Furthermore, volume of sales largely dictates a good operating margin. A company that only sells 500 products annually must have a much higher operating margin than a company that sells thousands of products annually to make the same amount of profit.

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