Operating Margin - Afterpay Ltd (ASX:APT)

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Price: 66.47 AUD

Market Cap: 20B AUD

-7.8%

Current

-7%

Average

3.3%

Industry

Operating Margin represents how efficiently a company is able to generate profit through its core operations.

Higher ratios are generally better, illustrating the company is efficient in its operations and is good at turning sales into profits.

Operating Margin

-7.8%

Operating Profit

-72.5m

Revenue

924.7m

Operating Margin Across Competitors

Country	Company	Market Cap	Operating Margin
AU	Afterpay Ltd ASX:APT	19.2B AUD	-8%
US	Visa Inc NYSE:V	681.6B USD	66%
US	Mastercard Inc NYSE:MA	521.6B USD	59%
US	Automatic Data Processing Inc NASDAQ:ADP	104.8B USD	26%
US	PayPal Holdings Inc NASDAQ:PYPL	56.4B USD	19%
NL	Adyen NV AEX:ADYEN	43.8B EUR	41%
US	Paychex Inc NASDAQ:PAYX	41B USD	40%
US	Fidelity National Information Services Inc NYSE:FIS	34.9B USD	17%
US	Fiserv Inc NYSE:FI	34.3B USD	29%
ES	Amadeus IT Group SA MAD:AMS	27B EUR	29%
US	Broadridge Financial Solutions Inc NYSE:BR	26.7B USD	18%

Afterpay Ltd
Glance View

Economic Moat

None

Market Cap

19.2B AUD

Industry

Technology

In the bustling arena of financial technology, Afterpay Ltd. emerged as a revolutionary player that redefined how consumers approach shopping. Founded in Australia in 2014, the company tapped into the millennial and Gen Z desire for payment flexibility by offering a 'buy now, pay later' service. The way Afterpay works is straightforward yet ingenious: it allows consumers to purchase items immediately and pay for them in interest-free installments over time. Retailers pay Afterpay a fee—usually a percentage of the purchase price—for every transaction they facilitate, which immediately provides value to the merchants by driving sales and attracting customers who may otherwise be hesitant to commit to full upfront payments. This model rapidly gained traction among both online and brick-and-mortar stores, blending seamlessly into the shopping experience and offering a compelling alternative to traditional credit. Afterpay’s path to profitability is fueled by a two-pronged revenue approach. Firstly, their primary income stream stems from the merchant fees that retail partners gladly absorb in exchange for increased conversion rates and larger basket sizes. Secondly, while Afterpay’s model is largely interest-free for on-time paying consumers, the company also charges late fees for missed payments, which serves as an additional source of income. This combination of revenue streams has enabled Afterpay to scale quickly, expanding internationally and partnering with global brands. Their innovation lies not only in the payment flexibility offered to consumers but also in the rich data analytics and insights they provide retailers, further enhancing customer engagement and optimizing marketing strategies. As they continue to grow, Afterpay exemplifies the impactful convergence of technology and finance, reshaping consumer behavior worldwide.

View APT Analysis

APT Intrinsic Value

What is Intrinsic Value?

Economic Moat is a concept popularized by Warren Buffett to describe a company's durable competitive advantage. It represents the 'moat' that protects a company from competitors and helps it sustain profitability over the long term. Our analysis of the past 10 years showed that companies with a wide economic moat significantly outperformed the market, delivering +645% returns compared to +189% for the S&P 500.

Our research into Economic Moat performance spans the past 10 years and focuses on companies with a wide economic moat. For this analysis, we calculated the average stock price returns of these companies, comparing them to the performance of the S&P 500 index over the same period.

The results were compelling: wide moat stocks achieved a remarkable +645% average return, compared to +188% for the broader market. This difference highlights the long-term benefits of investing in businesses that can maintain their market position and pricing power over time.

Note: This research does not account for survivorship bias. Past performance is not indicative of future results.

Determining whether a company has an economic moat requires both a deep dive into financial metrics and a qualitative assessment of its competitive position. Our analysts conduct a rigorous evaluation that focuses on identifying structural advantages that enable a company to sustain profitability and defend its market share over the long term.

The process begins with an analysis of a company’s historical financial performance. We assess how consistently the company has generated returns above its cost of capital and whether those returns have been stable or improving. However, financial performance alone doesn’t reveal the full picture. To understand the sources of these advantages, we evaluate five key drivers of economic moats:

Network Effect: We analyze whether the value of a company’s product or service grows as its user base expands. Platforms like payment systems or marketplaces benefit from this self-reinforcing.

Switching Costs: We assess whether customers face significant costs or disruptions when switching to a competitor’s product or service. High switching costs create customer stickiness and provide pricing power.

Intangible Assets: Strong brands, patents, and regulatory licenses can protect a company’s market position by creating barriers for competitors or enabling premium pricing. For example, a well-recognized consumer brand may command higher customer loyalty and margins.

Efficient scale: Occurs when a market is optimally served by one or a few players, making it unprofitable for new entrants to compete. This typically happens in industries with high fixed costs or geographic constraints, such as utilities or pipelines.

Cost Advantage: Companies with structural cost advantages can produce goods or services at a lower cost than their competitors, enabling them to offer competitive pricing or maintain higher margins. These advantages often arise from economies of scale, superior supply chain management, or proprietary technology. Firms like Walmart leverage their massive scale to negotiate better terms with suppliers, allowing them to undercut competitors on price.

By examining these factors in combination with a company’s financial performance and market positioning, we classify each company into one of three categories:

This rigorous evaluation ensures that our moat ratings are both comprehensive and reliable, giving investors the tools they need to make well-informed, long-term decisions.

The AI Assistant may sometimes provide inaccurate information.

Make your own investment decisions or consult a licensed financial advisor.

US	Johnson & Johnson NYSE:JNJ	Pharmaceuticals
US	Berkshire Hathaway Inc NYSE:BRK.A	Financial Services
US	Bank of America Corp NYSE:BAC	Banking
US	Mastercard Inc NYSE:MA	Technology
US	UnitedHealth Group Inc NYSE:UNH	Health Care
US	Exxon Mobil Corp NYSE:XOM	Energy
US	Pfizer Inc NYSE:PFE	Pharmaceuticals
US	Palantir Technologies Inc NYSE:PLTR	Technology
US	Nike Inc NYSE:NKE	Textiles, Apparel & Luxury Goods
US	Visa Inc NYSE:V	Technology
CN	Alibaba Group Holding Ltd NYSE:BABA	Retail
US	JPMorgan Chase & Co NYSE:JPM	Banking
US	Coca-Cola Co NYSE:KO	Beverages
US	Walmart Inc NYSE:WMT	Retail
US	Verizon Communications Inc NYSE:VZ	Telecommunication
US	Chevron Corp NYSE:CVX	Energy

M	Matrix Holdings Ltd HKEX:1005	0.48 HKD
	Tongling Jingda Special Magnet Wire Co Ltd SSE:600577	12.38 CNY 1.39%

	Johnson & Johnson NYSE:JNJ	207.63 USD -0.07%
	Berkshire Hathaway Inc NYSE:BRK.A	747 000 USD -0.57%
	Bank of America Corp NYSE:BAC	56.17 USD -0.14%
	Mastercard Inc NYSE:MA	579.6 USD 0.03%
	UnitedHealth Group Inc NYSE:UNH	331.83 USD 1.3%
	Exxon Mobil Corp NYSE:XOM	119.11 USD -0.09%

	Franklin Covey Co NYSE:FC	17.08 USD 0.65%
	Mohawk Industries Inc NYSE:MHK	110.23 USD 0.18%
	Ardmore Shipping Corp NYSE:ASC	10.8 USD 0.84%
	ASGN Inc NYSE:ASGN	50.02 USD 0.34%
	Skyworks Solutions Inc NASDAQ:SWKS	64.21 USD -0.47%
	Weatherford International PLC NASDAQ:WFRD	77.66 USD -0.56%

	Johnson & Johnson NYSE:JNJ	207.63 USD -0.07%
	Bank of America Corp NYSE:BAC	56.17 USD -0.14%
	Mastercard Inc NYSE:MA	579.6 USD 0.03%
	Salesforce Inc NYSE:CRM	266.08 USD 0.31%
	Abbvie Inc NYSE:ABBV	229.98 USD 0.04%
	Home Depot Inc NYSE:HD	349.78 USD 0.7%

Afterpay Ltd
ASX:APT