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A company's net margin, typically expressed as a percentage, is its net profit divided by its net sales. Net profit and net sales are the amounts the company has left after subtracting relevant expenses from gross profits and gross sales.
The higher the percentage, the more profitable the company is. Fundamental analysts use net margin, sometimes called net profit margin, as a way to assess how effective the company is in converting income to profit.
In general, a higher net margin is the result of an appropriate pricing structure and effective cost controls.