INVEST ED

DAY 7
COMPARING STOCKS:
PROFIT MARGINS

WEVE ALREADY LOOKED AT

MARKET
CAP

DIVIDEN
DS

EPS

P/E
RATIO

ROE

PEG
RATIO

PROFIT MARGIN
Measures how much out of every
$1 in sales the company keeps in
profit.
EARNINGS EXPENSES = PROFIT

PROFIT MARGIN
Mr. Gerrys TIE COMPANY sold $1 million in
ties last year. However, $800,000 went to pay for
materials, workers, facilities, equipment,
advertising, etc. So Mr. Gerry actually only made
$200,000 profit:

EXAMPLE:

$1,000,000 in sales - $800,000 in costs = $200,000

profit
The PROFIT MARGIN is figure out by taking the PROFIT and dividing by
TOTAL SALES:
$200,000 profit / $1,000,000 sales = 20% PROFIT MARGIN

The TIE COMPANY has 20 cents of profit for every $1 in sales.

PROFIT MARGIN
EXAMPLE:

What was Mr. Gerrys PROFIT MARGIN?

$1,000,000 in sales - $800,000 in costs =

$200,000 profit
The PROFIT MARGIN is figured out by taking the PROFIT and
dividing by TOTAL SALES:
$200,000 profit / $1,000,000 sales = 20% PROFIT MARGIN

The TIE COMPANY has 20 cents of

profit for every $1 in sales.

VIDEO : PROFIT MARGIN

Watch the video on PROFIT
MARGIN to better understand how
it influences investors.

COMPARE PROFIT MARGIN

MR. GERRYS TIE CO.

YEAR 1
Sold $1 million
$800,000 for expenses

YEAR 2
Sold $2 million
$1,700,000 for expenses

PROFIT:

PROFIT:

$1,000,000 in sales
- $800,000 in costs =
$200,000 profit

PROFIT MARGIN:

$2,000,000 in sales
- $1,700,000 in costs =
$ 300,000 profit

PROFIT MARGIN:

$200,000 profit
$1,000,000 sales = 20%
PM

The TIE COMPANY has 20

cents of profit for every
$1 in sales.

$300,000 profit
$2,000,000 sales = 15%
PM

The TIE COMPANY has 15

cents of profit for every
$1 in sales.

COMPARE PROFIT MARGIN

MR. GERRYS TIE CO.
YEAR 1

YEAR 2

$200,000 profit
20% PM

$300,000 profit
15% PM

The TIE COMPANY has

20 cents of profit for
every $1 in sales.

The TIE COMPANY has

15 cents of profit for
every $1 in sales.

Although Mr. Gerry

made MORE in Year 2,
the expenses that year
ATE UP a lot of the
profit!!!

FINDING PROFIT MARGIN :

Yahoo Finance

PROFT
MARGIN:
KO
COKES
PROFIT
MARGIN is
17.41%
*WHAT ABOUT
APPLES ROE?

PROFIT
MARGIN:
AAPL
APPLES
PROFIT
MARGIN is
21.61%

COMPARE PROFIT MARGIN :

Whats it mean?
COKES Prof
Marg is
17.41%
18 cents of
each $1 is
profit

APPLES Prof
Marg is
21.61%
22 cents of each
$1 is profit

ACTIVITY : PROFIT MARGIN

Look up a companys PROFIT
MARGIN of your choice and write
the STOCK SYMBOL and the
PROFIT MARGIN on the board.

USING INTERACTIVE CHARTS :

Yahoo Finance

USING INTERACTIVE CHARTS : 1

DAY

USING INTERACTIVE CHARTS :

10 YEAR

Click on D
to see when
DIVIDENDS
paid. S for
SPLITS.

USING INTERACTIVE CHARTS : 1

YEAR

HIGHEST?
LOWEST?
How many
DIVIDENDS
paid?

USING INTERACTIVE CHARTS :

COMPARE 1

Compare to an INDEX
How did this stock do
compared to the stock
market as a whole?
Were they mostly lined up?

USING INTERACTIVE CHARTS :

COMPARE 2

Now, choose
COMPETITORS to
compare with.

USING INTERACTIVE CHARTS :

COMPARE 2

The key above shows

the COLOR for each
company.
What does this chart
show?

ACTIVITY : INTERACTIVE
CHARTS
TRY APPLE
Using the 10-year chart, what was Apples pper share
on Jan 1, 2007?
Using the 1-year chart, what was the DATE and
AMOUNT of HIGHEST PRICE PER SHARE in the last 12
months?
WHEN was Apples LAST DIVIDENT and HOW MUCH?
WHEN was the date of APPLES last SPLIT?
Now, use the comparison feature and add IBM and
Hewlett-Packard to the chart.
Which of the three companies spent most of the last 12
months on the bottom?
Who was at the bottom most of April 2014?