EBITDA margin

Definition

EBITDA margin measures a company’s operating profitability by expressing earnings before interest, taxes, depreciation, and amortization as a percentage of total revenue. It is calculated by dividing EBITDA by net sales, then multiplying by 100 to yield a percentage. This metric strips out non‑cash depreciation and amortization expenses, as well as financing and tax effects, providing a clearer view of core operational performance across firms with differing capital structures. A higher EBITDA margin indicates efficient cost control and strong pricing power, revealing how much revenue remains after covering day‑to‑day operating expenses. Investors and analysts use this ratio to compare profitability trends over time and across peers, isolating operational strengths from financing decisions and accounting practices.

See also