What is the meaning of Profit margin?

Profit margin is a company's profit margin is a ratio derived by dividing its net earnings, after taxes, by its gross earnings minus certain expenses. Profit margin is a way of measuring how well a company is doing, regardless of size. For example, a $50 million company with net earnings of $10 million, and a $5 billion company with net earnings of $1 billion, both have profit margins of 20%. Profit margins can vary greatly from one industry to another, so it can be difficult to make valid comparisons among companies unless they are in the same sector of the economy.