Healthy margins, either constant (expenses and revenues increase by the same percentage) or increasing over time, are a green light to invest in a company, especially if the numbers are superior to those of the direct competition. This chart (source Motley Fool) shows the evolution of Harley-Davidson margins during the last 5 years. Over these years, gross margin peaked at 39.7% and averaged 36.8%. Operating margin peaked at 25.8% and averaged 20.4%. Net margin peaked at 16.9% and averaged 11.8%.
Operating margin is the percentage of money left after operating expenses have been subtracted from gross profit. These expenses include research & development; depreciation; and selling, general, & administrative (SG&A) which includes office rent and executive salaries. The dollar amount is called operating profit.
Net margin. This is the percentage of money left after all expenses have been subtracted from revenue. Besides the above, this includes tax expense and interest expense. The dollar amount is called net profit.