[therealdeal2020]

hmm yes but also most great startups have a negative operating margin on paper since they re-invest almost all their earnings into development, marketing, etc... just dividing earnings by revenue won't give meaningful insight in most companies that intend to grow or expand.

[zeckalpha]

Reinvestments in the business factor into a different ratio. This only factors operating expenses.

[projektfu]

I suppose it depends where things end up in the system you use. Usually, R&D ends up as an expense in GAAP (in the US) but you could produce a supplemental statement showing that as capitalized investment. Even so, early-stage industries often have negative operating profit.

Imagine you are working on a drug you will take to testing next year. You could be 5 years from actually marketing it. Even if you capitalize all the expense of research and development, to get it off the income statement, you still have to pay for the rest of the business.