Margins - Edit

Sorry. My first screening of stocks via Value Line wasn’t OK at all. Here’s something better.

********

Net income divided by net sales equals operating margins.

In other words, operating margins represent how much a business needs to sell things to make money.

Here's a few businesses with interesting margins:

Visa: 69%
Credit Acceptance Corp: 69%
Netflix: 60%
Mastercard: 58%
Canadian Pacific: 52%
Priceline: 40%
McDonald’s: 39%
Microsoft: 39%
Alphabet: 32%
Apple: 31%
Disney: 30%
Starbucks: 24%
Tiffany: 24%
Fastenal: 23%
O'Reilly: 22%

And here's a short list of great businesses with low margins (7% margins or less).

Metro: 7%
Alimentation Couche-Tard: 6%
Carmax: 6%
Costco: 5%

For that list, I've retained only 4 stock known by everybody. There were many obscure names on my screening, which is normal: if a business has poor margins, it's probably a poor business. So, you don't hear about it. 

Obviously, If there's some money to make, entrepreneurs will be interested to go start a business in that specific field. So, there should be some competition eventually. But it's not a good reason to avoid to take a look at high margins businesses first.  

Few people look at margins first. It's not the first thing to check when you analyze a stock, but it's interesting to see the challenges that faces the business (margins are one of these challenges). And it's impossible not to be amazed by Couche-Tard that achieved such a spectacular performance with such low margins.