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Metric · Margin

EBITDA Margin Explained

EBITDA margin relates earnings before interest, taxes, depreciation and amortization (EBITDA) to revenue. It's especially useful for comparing companies with different levels of capital investment, since depreciation has no effect.

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Updated 20266 min read
Formula
EBITDA margin = EBITDA ÷ Revenue × 100
> 20%Strong margin
10–20%Moderate margin
< 10%Weak margin
Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator
EBITDA
Operating profit before interest, taxes, depreciation and amortization.
Denominator
Revenue
Revenue from the core operating business.

Calculator

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Result EBITDA margin
Moderate margin
18.0 %
1
An EBITDA margin above 20% is considered strong and points to a scalable, margin-rich business model.
2
A margin below 10% is often normal in capital-intensive or low-margin industries (e.g. retail, transport).
3
Since depreciation is excluded, EBITDA margin is especially useful for comparing young and old asset bases. But it should always be viewed alongside EBIT margin.

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

EBITDA margin doesn't back out depreciation and is therefore usually higher than EBIT margin. It shows operating earnings power before the wear on fixed assets is accounted for.
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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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