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The riskier business isn't the one with the thinnest margin

The riskier business isn't the one with the thinnest margin

Low-margin businesses operate without a safety buffer. A small increase in fuel prices, labor costs or raw materials – or even a minor slowdown in demand – can erase most of their profits. That is why these industries obsess over scale, utilization, logistics and operational efficiency. Not to maximize profits – but simply to protect them. The interesting question is: which business model is actually riskier – a low-margin business with massive scale, or a high-margin business with limited demand?
The riskier business isn't the one with the thinnest margin

Sources: Damodaran / NYU Stern U.S. industry margins database (Jan 2026).
Note: After-tax operating margins for U.S. public companies.

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