Gross Profit Margin

The margin strips out size, so a small firm and a large firm in the same trade can be compared. It is the cleanest single number for product economics.

Industry structure sets the range. Branded consumer goods and software often sit at high gross margins. Commodity distribution sits at low ones. A "good" margin is one that is good for that industry and stable.

Watch the direction over several years, not a single print. A one-quarter dip can be a raw-material spike that gets passed on later. A multi-year slide is a change in the franchise.

Mix shifts can flatter the margin. Selling more of a high-margin spare-parts line and less of the original equipment can raise the percentage while the core product gets weaker.