EBITDA margin

What it measures¶

EBITDA is earnings before interest, taxes, depreciation and amortisation — operating income with the yearly write-down of equipment (depreciation) and of acquired intangible assets (amortisation) added back. The EBITDA margin divides it by revenue: how much of each unit of sales the operations produce before those write-downs.

Why it is on the page¶

EBITDA is the measure lenders and rating agencies start from, because it approximates the cash the operations produce before reinvestment. Comparing the EBITDA margin with the operating margin shows how much of the business's cost is the wearing-out of its equipment.

Thresholds, their source and the population they were fitted on¶

The page draws no zones: the margin depends on the industry and on how capital-heavy the business is.

• Fitted on: no population — a descriptive ratio.
• Evidence grade: not graded.

A worked example¶

An illustration, not a stored figure: a company with revenue of 1,000 million, operating income of 150 million and depreciation and amortisation of 50 million has an EBITDA of 200 million — an EBITDA margin of 20% against an operating margin of 15%. The 5-point gap is the yearly cost of its equipment wearing out.

What “No verdict” means here¶

The row carries no verdict of its own. It reads insufficient data when operating income, depreciation or revenue is not stored.

What the verdict is and is not¶

The figure describes the operating earnings before write-downs as a share of one year's sales. Leaving out depreciation flatters companies that must keep replacing equipment. It is not a forecast and not an instruction to trade the shares.