Net profit margin = (Net profit ÷ Revenue) × 100. If a company earns ₹100 in sales and keeps ₹15 as profit, its net margin is 15%.
Higher margins usually mean the company has pricing power, an efficient cost structure, or both. Software and consumer brands tend to have high margins; commodity businesses (steel, cement, telecom) tend to have thin ones.
Watch margins over time. A company whose margin has climbed from 8% to 15% over five years is usually doing something right.
Warning sign: shrinking margins even as revenue grows — often means the company is buying growth by cutting prices.