Gross profit margin. Focus on the trend over the years. If it is fluctuating a lot in a cyclical manner, then it means that the company does not have pricing power over its customers and is not able to pass on increases in raw material cost. On the contrary, if it is high and stable or improving over the years, then the company in question may have an economic moat. Dig deeper in such cases (as well as when a company’s operating margins are much higher than that of its industry peers).
