KPI Explained

Key performance indicators, or KPIs, are metrics that many companies use to measure progress toward their goals.
Connor Emmert
By Connor Emmert 
Edited by Julie Myhre-Nunes

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.


The basics of KPIs

  • KPIs, or key performance indicators, use measurable data to track a company’s progress toward a targeted set of goals.

  • From an investor perspective, KPIs are typically related to a company’s financial performance, but they can also be used to measure marketing, management or employee efficiency.

  • KPIs are typically tracked on a monthly, quarterly, or annual basis. Understanding a company’s performance history can help investors determine future performance, and can be a key component when analyzing stocks in a portfolio.

  • KPIs help provide transparency to the public regarding internal business operations and development over time.

What are KPIs?

KPIs are sets of quantifiable data that companies use to track their progress toward a predetermined set of goals. Many KPIs are designed to help companies on the internal side of business operations. For example, they can be used to measure employee efficiency for tasks such as client onboarding or customer retention. On top of that, KPIs can be used to measure a company’s performance relative to competitors in the same industry.

In the arena of stock analysis, there’s an abundance of KPIs that can be used to try to determine a company’s success in its industry. For investors, researching financial statements for stock companies in a portfolio can be time-consuming. But there are a few key KPIs that can help investors roughly determine a company’s financial standing at a quick glance.

KPI Metrics

KPIs can be divided into three distinct categories:

Financial KPIs

If you’re researching KPIs for the purpose of stock analysis, you’ll probably want to rely heavily on KPIs related to each company’s finances. Publicly traded companies are required to file quarterly and annual reports with the Securities and Exchange Commission detailing earnings, profits and any major business changes

U.S. Securities and Exchange Commission. Exchange Act Reporting and Registration. Accessed May 3, 2022.

If you’re trying to gauge a company’s financial standing, you may want to keep track of financial KPIs on a quarterly and annual basis so you can monitor any changes. Some examples include:

  • Revenue — The amount of income a company has.

  • Expenses — The amount of money a company spends. Total expenses can include operating costs like rent, payroll, utilities, etc., but they can also include production costs.

  • Net profits — Revenue minus expenses and taxes


  • Operating cash flow — The amount of money generated by normal business activities, plus any non-cash expenses (such as depreciation), adjusted for any changes to working capital.

  • Liquid capital — Cash balances, bank deposits, money market holdings or other assets that can be converted quickly into cash. Liquid capital becomes important if the business is looking to make acquisitions or expand into new territories

    Corporate Finance Institute. Liquid Asset. Accessed May 2, 2022.

Customer KPIs

The SEC generally does not required customer KPIs to be reported, so they tend to be tracked internally by companies trying to measure things like:

  • Customer satisfaction and retention — Surveying existing customers can help businesses measure customer satisfaction. Many companies also track customer retention — or repeat customers — to gauge satisfaction with their products or services.

  • Customer acquisition cost — This measures how much money is spent on marketing, advertising, and onboarding expenses for each new client.

  • Customer turnover — Do customers keep coming back to use the products or services the business offers, or are they leaving for a competitor? This is what customer turnover measures


Marketing KPIs

Similar to customer KPIs, marketing data tends to fall on the internal side of business operations, so finding publicly available information might be difficult. Companies will use marketing KPIs to measure metrics such as:

  • Marketing expenses — The amount of money being spent on marketing and advertising.

  • Digital marketing ROI — Return on investment for money being spent on digital marketing campaigns.

  • Social media traffic and conversion rates — A lot of companies can track how many prospective clients visit their website. They can also track what percentage of those clients are buying products, instead of simply browsing the site.

Where to find KPIs

While data related to customer and marketing KPIs might be difficult to find as it is not required to be reported to the public, financial information is extremely accessible. Financial websites like Yahoo Finance, Morningstar and Google Finance will typically update information for publicly traded stocks as it becomes available. The company itself will also publish its quarterly financial reports on its website or on an investor version of its website.

How KPIs impact your investments

Reviewing a company's KPI performance can help investors understand how that company is performing on a quarterly or annual basis. Say you owned some Apple stock and you wanted to determine its gross profit year over year. With a few clicks, you’d be able to find that Apple’s gross profit jumped from $104.96 billion in 2020 to $152.84 billion in 2021. This represents an increase of approximately 45.62% in gross profit for Apple. You’d also find that Apple increased its operating expenses by roughly $5.22 billion from 2020 to 2021, which is peanuts compared to the $47.88 billion increase in gross profit.

Using this information, you might deduce that the additional operating costs undertaken by Apple were money well spent, and that the jump in additional profits bodes well for the company’s overall performance.

On the other hand, say you're researching a company and you find that expenses are increasing while revenue or profits are decreasing. In that case, the business might be struggling to sell its product; perhaps it has also increased marketing expenses to compensate for falling short on its expected profits. If a company is struggling to meet its goal for revenue or profits, there's a good chance the price of that stock might dip due to shareholder concern. As an investor, if performance does not improve in the near future, you might reconsider holding that company's stock in your portfolio.

Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.