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In the following video, Fool.com analyst Austin Smith explains net margin, which is a company's net income divided by revenue or sales. It's important to note that net margins vary wildly by industry. For example, grocery stores have notoriously slim net margins, while software companies' are very high -- compare Safeway's (UNKNOWN:SWY.DL)
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Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and Microsoft and has options on Facebook. Motley Fool newsletter services recommend Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.