"Is 3% net margin bad?" For a software company, it's catastrophic. For a grocery retailer, it's Tuesday. For a commodity trader, it's excellent. Every ratio has a sector-normal band, set by the physics of the business model: gross-margin structure, capital intensity, the sign of working capital, cyclicality. A number means nothing until you place it against the band for its model. These are the "what good looks like" tables from the liquidity work, promoted into a standing comparison. The bands below are illustrative order-of-magnitude anchors and no more than that. Build your own from the sources below and update them every year:
| Model (examples) | Net margin | Asset turns | Post-tax ROIC norm | The ratio that actually matters |
|---|---|---|---|---|
| Grocery retail (DMart, Kroger) | 1–4% | 3–4× | 10–20% | Turns, same-store growth, shrinkage |
| FMCG brands (HUL, P&G) | 12–18% | 1–2× | 20–60% | A&P %, volume growth, mix |
| IT services (Infosys, Accenture) | 12–20% | 1.5–2.5× | 25–50% | Utilization, pricing, attrition |
| Autos OEM (Maruti, GM) | 4–9% | 1–1.5× | 8–15% | Capacity utilization, mix |
| Steel/commodities (Tata Steel, Nucor) | −5 to +15% (cyclical) | 0.5–1× | mid-cycle ~8–12% | EBITDA/tonne, cost-curve position |
| Software products (Microsoft) | 20–35% | 0.5–1× | 25–60%+ | Gross margin 70–85%, retention |
| Airlines (IndiGo, Delta) | −5 to +8% | 0.7–1.2× | ~WACC ± 2pp | RASK−CASK spread, load factor |
| Banks (HDFC Bank, JPMorgan) | n.m. (different toolkit) | n.m. | use ROE vs COE, ROA, NIM | NPAs/credit cost, ROA ~1–2% |
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Where do you find industry average ratios?
Norms come from a few durable, free-first places. Damodaran's data library (pages.stern.nyu.edu → Data → Current data) gives margins, ROE, ROIC by industry, in US and emerging-market/global sets, refreshed each January. Re-pull it every January. That's the standing calibration ritual. Then screener.in carries industry medians for India, though you should compute your own median from the peer page and never trust a site's pre-averaged number without knowing its formula. The RBI's studies on private corporate-sector finances give India-wide aggregates. And over time there are your own company files. By Phase 5 you'll have hand-built norms for every sector you've studied, built from those files.
Two cautions. First, norms describe. They don't excuse. "Airlines normally earn about their cost of capital" puts a 7% ROIC in context. It doesn't make the airline a good business, and comparison 5 never overrides comparison 4. Second, watch survivorship. Published sector averages are computed on companies still alive. Even the paint industry's "normal" 18% ROCE doesn't include the entrants that died trying to reach it. Treat sector norms as a reference range from a biased sample: useful, and never sacred.