Educational Materials nr.5 Net Margin is bigger than Operating
Hello dear investors,
This article is about rare situation, when net margin is bigger then operating margin. Such situation need to be analyzed well to understanding potential of the company.
This happen from external or internal reasons:
1. When company can’t pay taxes and/or have tax benefits. Company will not pay taxes untill she will get net profit as tax benefit. Profit from tax benefit can be holded or payed as dividends. It have good influence on stock growning. In some countries this situation can be because of low or zero taxation.
2. Net profit can be from non-operating activity. It is income from investing activity of the company, selling assets, currency course changing and so on. Company can make her status better in a financial statement. It will seems from big difference between P/E and P/E without NRI. That is mean, that company have most income not from operating activity and is bad signal for investors.
Analysis on a BIO case.
Net margine is bigger then operating in 8 times. Company has difference between P/E and Price-to-Free-Cash-Flow in 8 times. It means, that declared income does not supported by real result. P/E equality to the P/E without NRI means, that company have income just from operating activity.
In this case reason of bigger meaning net margin from operating margin is in taxation. Company does not have cash to pay taxes, so she had tax benefits. She wrote this tax benefits in net income.
Cases, when net margin is bigger then operating are rare and need serious research and analysis to understand profitability from investing in this company.
Wish you have good investing and big profits,
Financial analist and adviser,
Valerii Selin
This article is about rare situation, when net margin is bigger then operating margin. Such situation need to be analyzed well to understanding potential of the company.
This happen from external or internal reasons:
1. When company can’t pay taxes and/or have tax benefits. Company will not pay taxes untill she will get net profit as tax benefit. Profit from tax benefit can be holded or payed as dividends. It have good influence on stock growning. In some countries this situation can be because of low or zero taxation.
2. Net profit can be from non-operating activity. It is income from investing activity of the company, selling assets, currency course changing and so on. Company can make her status better in a financial statement. It will seems from big difference between P/E and P/E without NRI. That is mean, that company have most income not from operating activity and is bad signal for investors.
Analysis on a BIO case.
Net margine is bigger then operating in 8 times. Company has difference between P/E and Price-to-Free-Cash-Flow in 8 times. It means, that declared income does not supported by real result. P/E equality to the P/E without NRI means, that company have income just from operating activity.
In this case reason of bigger meaning net margin from operating margin is in taxation. Company does not have cash to pay taxes, so she had tax benefits. She wrote this tax benefits in net income.
Cases, when net margin is bigger then operating are rare and need serious research and analysis to understand profitability from investing in this company.
Wish you have good investing and big profits,
Financial analist and adviser,
Valerii Selin