EBITDA margin

EBITDA margin is EBITDA expressed as a percentage of revenue, showing operating profitability before depreciation, amortisation, interest and tax distort the comparison.

What it is

See it move

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A company earns operating profit of €180,000 on revenue of €1,200,000, then adds back depreciation of €90,000 and amortisation of €30,000 to reach EBITDA of €300,000. Dividing €300,000 by €1,200,000 gives an EBITDA margin of 25 percent, the share of revenue converted into earnings before interest, tax, depreciation and amortisation.

The formula

LaTeX

\text{EBITDA margin} = \frac{EBITDA}{Revenue}

Variables

$E B I T D A$: Earnings before interest, tax, depreciation and amortisation (€)
$R e v e n u e$: Total revenue for the period (€)

Expresses EBITDA as a percentage of revenue to compare operating profitability across firms regardless of financing or asset age.

Check yourself

PracticeCORE

A company has revenue of €900,000, operating profit of €126,000, depreciation of €54,000 and amortisation of €18,000 for the year. What is its EBITDA margin?

Select an answer to check your understanding.