Yesterday I was looking at news about quarterly results of major companies and I realized that many people confuse net profit with revenue. It’s like comparing the money that comes in with what you actually keep in your pocket at the end of the month, you know?

Basically, net profit is what’s left after the company pays for everything: salaries, rent, taxes, raw materials, everything. If the company has a revenue of R$ 50,000 but has R$ 26,000 in costs and expenses, its net profit is R$ 24,000. Just like that. And it’s this number that really matters to investors because it shows whether the business actually generates a return or just has pretty numbers on the surface.

One detail that many people ignore: net profit is not the same as cash in hand. Accounting works differently from actual cash flow. A company can have high net profit but face liquidity problems because it sold on credit. That’s why before investing in any stock, it’s worth also looking at the balance sheet and debt levels, not just profit.

The net profit margin is another useful indicator that helps understand how much of the revenue turns into real profit. If you divide net profit by revenue and multiply by 100, you get this percentage. A bank might have a margin of 20%, while a retail store might be around 3%, and that’s totally normal. Each sector has its own dynamics.

Looking at Brazilian companies, you can clearly see these differences. Itaú has a net profit above R$ 35 billion annually because banks can achieve high margins. Petrobras varies a lot depending on oil prices and exchange rates, so its profit fluctuates quite a bit. Vale, during good cycles of iron ore, has margins among the highest on the stock exchange. But Magazine Luiza, which is retail, historically has tight margins because that’s just how the segment works.

The difference between gross profit and net profit is also worth understanding. Gross profit only deducts direct production costs, while net profit is after everything, including administrative expenses and taxes. That’s why net profit is what really matters to assess whether a company creates value sustainably.

If you want to build a more solid portfolio, I always recommend analyzing net profit along with other indicators: cash flow, debt levels, sector outlook. You can’t rely on just one number. Quality information and a long-term vision make all the difference when making investment decisions. It’s worth paying close attention to these data, especially if you’re just starting out in the stock market or crypto here at Gate.