Gross margin (marge brute or marge commerciale) is the difference between revenue and the direct cost of goods sold or services delivered, expressed as a percentage of revenue. It is the primary indicator of a company's pricing power and production efficiency, and the starting point for all profitability analysis. In financial due diligence, gross margin trends — their level, evolution and drivers — are analysed in detail: volume vs. price effects, product mix changes, raw material cost pass-through, and competitive pricing dynamics. Sustainable gross margin above sector median signals a genuine competitive advantage worth a valuation premium.

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Example: a Swiss food distributor presents a gross margin declining from 31% to 27% over three years — a 4-point erosion representing CHF 1.2 million of annual lost contribution on CHF 30.0 million revenue. Due diligence identifies two causes: loss of two premium product lines (structural) and price competition from online platforms (ongoing). The structural erosion is treated as permanent in the normalised EBITDA — reducing the valuation relative to the seller's projections.

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Hectelion analyses gross margin trends and their drivers as a core component of every quality of earnings review in financial due diligence.