STEP 1Numbers speak with an industry accent
Just as the same word means slightly different things in different regions, the same ratio has a different "usual" level in each industry. First let's see why that difference arises.
So far we have calculated Robin Bakery's numbers one by one: a debt-to-equity ratio of about 67%, an operating margin of 12.5%, an ROE of 20% and a P/E of 15x. But you cannot tell from the numbers alone whether they are good or bad. Depending on what you compare with, the same number can be a compliment or a warning.
An easy analogy · height and weight
Looking only at the number 90 kg, you cannot tell whether someone is heavy. The same 90 kg means something completely different for a 190 cm basketball player and for a person who is 160 cm tall. Financial ratios are the same: you have to know the company's "build," that is, its industry, first to read them properly.
Ratios differ by industry because the way each industry makes money is different. Here are four examples.
| Industry trait | Ratio that differs as a result | Example |
|---|
| Uses large equipment for a long time, with stable rates | Can carry a lot of debt, so the debt-to-equity ratio is high | Electricity and gas |
| Receives advance payments before building the plant | Advance payments are recorded as liabilities, so the debt-to-equity ratio looks high | Shipbuilding (Lesson 10) |
| Keeps little, sells a lot | Low operating margin but high asset turnover (the low-margin, high-volume type, Lesson 23) | Wholesale and retail |
| Prices ride a cycle | Margins and P/E swing widely from year to year | Semiconductors (Lessons 3 and 13) |
So the first question when reading a ratio is not "is this number high?" but "what is usual for this industry?" The same goes for P/E. In industries whose earnings ride a cycle, P/E comes out very high when earnings are at the bottom and very low when earnings are at the peak. A P/E of 5x may not mean cheap; it may mean earnings are at the peak (the price cycle in Learn (Economics) Lesson 3).
Quick checkA wholesale and retail company has an operating margin of 3%. Can you conclude from that number alone that it is a company that does business badly?
It's too early to say. Wholesale and retail is by nature an industry that keeps little and sells a lot, so margins tend to be low. You need to look at the same-industry average and asset turnover together. Even with low margins, if goods turn over quickly, ROE can be fine (Lesson 23).
STEP 2How to choose companies to compare
Half of a comparison is done once you choose the counterpart well. Narrow down by industry classification first, then filter once more by business mix.
A set of companies to compare against is called a . The selection usually follows two steps.
1 Narrow down by industry classification. In Korea, industry categories based on Statistics Korea's Korean Standard Industrial Classification (KSIC) are used in disclosures and statistics, while overseas indices and brokerage materials use classifications such as GICS. Use this to pick the first candidates.
2 Filter by business mix. Even within the same "food" industry, a company that stamps out snacks in bulk at a factory and a company that bakes bread in its stores have different cost structures. Read the revenue mix and sales channels in 'II. Business Overview' of the annual report, as in Lesson 5, and keep the companies that make money in a similar way.
Let's build a peer group for Robin Bakery. We picked two fictional companies. Sunny Confectionery (fictional) makes snacks and mass-produced bread in a factory and supplies supermarkets, and Starlight Cafe (fictional) is a coffee-focused store chain. All three sell "bread and coffee," but their structures differ. In the figure below, switch the metric and line the three companies up side by side.
Robin BakeryFictional competitorsFood industry average (Bank of Korea)
All three companies are fictional companies in this course. Robin Bakery's figures are year-3 numbers (revenue growth is KRW 11.0 billion → KRW 12.0 billion, about 9.1%). The black vertical line is the food industry value (end of 2025, externally audited companies) from the Bank of Korea "Financial Statement Analysis for 2025 (Preliminary)," and only has an operating margin of 4.5% and a debt-to-equity ratio of 87.7%. No official industry average is shown for ROE, growth rate or P/E.
Put the three companies side by side and Robin Bakery's numbers look different. Its operating margin of 12.5% is far higher than Sunny Confectionery's (5%) or the industry average (4.5%). Then you have to ask why. Whether it is thanks to pricing power from selling its own baked bread at a premium (Lesson 13), or simply because it is still small and pays less rent, changes the picture ahead. Starlight Cafe's debt-to-equity ratio of 180% looks high, but if store leases are recorded as lease liabilities (Lesson 8), it is fairer to compare it with other cafes in the same industry.
P/E is the same. Starlight Cafe's revenue is growing quickly, so the market puts a high P/E (22x) on it, while Sunny Confectionery grows slowly and stays at 9x. As seen in Learn (Economics) Lesson 17, the more a company is expected to earn in the distant future, the higher its multiple. The starting point of comparison is to read it not as "the P/E is low, so it's cheap" but as "growth expectations differ."
Common misconceptions
"If it's better than the industry average, it's a good company?" No. An average mixes loss-making companies with top companies. Being better than average only means you now have "a reason to check why it is better."
"If it's the same industry, any company will do for comparison?" No. Even with the same industry name, if the revenue mix, size and sales channels differ, the normal range differs too. You need to filter once more by business description.
"You can rank companies by a single ratio?" No. A high margin often comes with low turnover, and a high ROE often comes with a lot of debt. You need to put several ratios together to see the shape of a company.
Quick checkIs a "large supermarket chain" a suitable company to compare with Robin Bakery? Bread makes up a small part of its sales.
Not suitable. Bread is just a tiny part of a supermarket's sales, and how it makes money (distribution, low margins, fast turnover) is completely different. Look at where most of the revenue comes from in the business description and pick similar companies.
STEP 3Side by side with the industry average
Now let's check what is "usual" for an industry using real statistics. The Bank of Korea publishes industry averages every year.
Each year the Bank of Korea compiles the financial ratios of externally audited companies by industry and publishes them as the "Financial Statement Analysis." These numbers are the standard . We saw some of them in Lessons 10 and 14; this time you switch between debt-to-equity ratio and operating margin on one screen.
Click a bar to see that industry's characteristics.
Source: Bank of Korea "Financial Statement Analysis for 2025 (Preliminary)" (released 2026-06-10), externally audited companies, tables 'Key stability indicators' and 'Key profitability indicators.' Financial and insurance industries are excluded from the survey. Hatched bars are this course's fictional companies.
Debt-to-equity ratios range more than sixfold, from 47.1% for electronics, video and communication equipment to 315.7% for electricity and gas. Operating margins also differ greatly, with 15.0% for electronics, video and communication equipment and 2.0% for construction in 2025. This means that applying the same number to different industries can lead to opposite judgments. Robin Bakery's comparison line is food (debt-to-equity ratio 87.7%, operating margin 4.5%).
Also remember that industry averages move from year to year. As seen in Lesson 14, the operating margin of electronics, video and communication equipment went from −3.7% in 2023 to 15.0% in 2025. For industries that ride a cycle, comparing with the trend over several years is better than a single year's average. That is the topic of the next lesson.
Industries to be careful with · banks and insurers
Banks record deposits, and insurers record premiums received, mostly as liabilities. So it is natural for their debt-to-equity ratios to exceed 1,000% (the fictional calculation in Lesson 10 gave 1,150%). For such industries, compare with yardsticks suited to the industry, such as loan-deposit spread and net interest margin (Learn (Economics) Lesson 18) or regulatory capital ratios. Financial and insurance industries are also excluded from the Bank of Korea's industry statistics.
Finally, let's practice guessing the industry. Look only at the shape of the ratios and pick which industry it might be.
The four companies' numbers are fictional figures meant to show the typical shape of each industry.
Try it yourself: comparing Robin Bakery in three steps
Let's use everything you've learned so far at once. A comparison always goes in the order of industry average → similar companies → reason for the difference. First put it next to the industry average, then compare it with two companies whose business is similar, and finally look in the annual report for why the differences arose.
| Metric | Robin Bakery | Sunny Confectionery | Starlight Cafe | Food average |
|---|
| Operating margin | 12.5% | 5% | 8% | 4.5% |
| Debt-to-equity ratio | 67% | 120% | 180% | 87.7% |
| ROE | 20% | 9% | 16% | — |
| Revenue growth | 9.1% | 3% | 15% | — |
| PER | 15x | 9x | 22x | — |
Robin Bakery, Sunny Confectionery and Starlight Cafe are fictional companies in this course. The food average is from the Bank of Korea "Financial Statement Analysis for 2025 (Preliminary)," and ROE, growth rate and P/E are left blank because there is no industry average on the same basis.
Step 1, compare with the industry average. Robin Bakery's operating margin of 12.5% is almost three times the food average of 4.5%, and its debt-to-equity ratio of 67% is lower than the average of 87.7%. The first impression is that, within its industry, profitability is high and debt is low.
Step 2, compare with similar companies. Sunny Confectionery, which mass-produces in a factory, has a margin of 5%, close to the industry average, while Starlight Cafe, which rents its stores, has a high debt-to-equity ratio of 180% because of lease liabilities. You can see that even within the same "food business," factory-type, store-type and directly operated bakery-type companies have different cost structures. For P/E, fast-growing Starlight Cafe is highest at 22x and slow-growing Sunny Confectionery is lowest at 9x. Robin Bakery's 15x fits with its margin and growth rate being somewhere in between the two.
Step 3, find the reason for the differences. Once you have confirmed the differences in numbers, look in the annual report for the "why." The judgment changes depending on whether Robin Bakery's high margin comes from products that can command higher prices, such as cake reservations (the revenue mix in Lesson 28), or from raw materials being temporarily cheap (the costs in Lesson 13). In the first case the difference can last; in the second it can disappear when raw material prices rise.
Find it yourself on DART
1 In the company overview that appears when you click a company name in DART, check the industry name. 2 In 'II. Business Overview' of the annual report, read the revenue mix and main products, and judge whether it is only an industry in name or a truly similar company. 3 For each candidate company, copy the numbers for the same year and the same basis (consolidated or separate) from the summary financial information in 'III. Financial Matters.' If the bases are mixed, the comparison goes wrong (Lesson 11).
How to use it in investing
| If you see this pattern | Ask first | Where to look together |
|---|
| Margin far above the industry average | Pricing power, or a temporary drop in costs? | Lesson 13 costs, Lesson 27 trends |
| Debt-to-equity ratio far above the industry average | Industry structure (advance payments, leases), or borrowings? | Lesson 8 liability classification, Lesson 10 |
| P/E much lower than competitors | Lower growth expectations, or earnings at the peak? | Lesson 16 P/E, Learn (Economics) Lesson 37 |
| Comparing bank and insurance stocks | Whether an industry-specific metric is used instead of debt-to-equity ratio | Learn (Economics) Lesson 18 |
Not always. An industry average is a number that bundles all externally audited companies, so it may differ from the picture of listed companies alone, and if one company spans several industries, it is hard to fit it to a single average. Comparison is not a standard for picking stocks; it is a tool that makes you ask why the numbers came out as they did.
Quick checkA construction company's 2025 debt-to-equity ratio is 120%. The construction industry average that year was 98.6%. Is this company risky?
It is higher than average, so it's time to check the reason. Look together at how much of the debt is borrowings (Lesson 8), whether the interest coverage ratio is sustainable (Lesson 10), and how this company moved while the industry average came down from 115.8% in 2023. Don't draw a conclusion from the fact that it is high alone.