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Metric · Margin

EBIT Margin Explained

EBIT margin (operating margin) relates operating profit (EBIT) to revenue. It shows how efficiently a company generates profit from its core business, independent of interest and taxes.

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Updated 20266 min read
Formula
EBIT margin = EBIT ÷ Revenue × 100
> 12%Strong margin
6–12%Moderate margin
< 6%Weak margin
Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator
EBIT
Operating profit before interest and taxes.
Denominator
Revenue
Revenue from the core operating business.

Calculator

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Result EBIT margin
Strong margin
12.0 %
1
An EBIT margin above 12% points to pricing power and cost discipline.
2
A margin below 6% shows a margin-weak business model that can absorb cost increases or price pressure less well.
3
The absolute level of the margin is highly industry-dependent. Software companies structurally achieve higher margins than, say, retail.

Used in these strategies

Magic Formula: Value + QualityGood companies at cheap prices: two factors, one score.High-Growth / Rule of 40Growth and profitability combined: no loss-makers.

Frequently asked questions

As a rough guide, a margin above 12% is considered strong, below 6% weak. But the industry-typical value varies considerably.
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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.

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