EBITDA Margin: A Comprehensive Guide to Profitability Analysis

Understanding and calculating EBITDA margin to evaluate business performance and operational efficiency

What is EBITDA Margin?

EBITDA Margin is a financial metric that measures a company's operating profitability as a percentage of its total revenue. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.

This metric provides insights into:

  • Core operational efficiency
  • Cash flow potential
  • Comparison across industry peers
  • Business scalability

EBITDA Margin Formula

EBITDA Margin = (EBITDA ÷ Total Revenue) × 100

Where:

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

EBITDA Margin Calculator

Calculation Results

Why EBITDA Margin Matters

Operational Performance

EBITDA margin provides clear insights into a company's operational efficiency by excluding financial and accounting decisions.

Industry Comparison

Enables meaningful comparison between companies regardless of size, capital structure, or tax jurisdiction.

Investment Analysis

Helps investors evaluate a company's core profitability and operational cash flow potential.

Industry EBITDA Margin Examples

Frequently Asked Questions

What is a good EBITDA margin?

A good EBITDA margin varies by industry. Generally:

  • Software/Tech: 20-30%
  • Manufacturing: 10-20%
  • Retail: 5-10%
  • Healthcare: 20-30%
Why exclude interest, taxes, depreciation, and amortization?

These items are excluded to focus on operational performance by removing the effects of:

  • Capital structure (interest)
  • Tax jurisdictions (taxes)
  • Capital investment decisions (depreciation and amortization)
How does EBITDA margin differ from profit margin?

EBITDA margin focuses on operational performance by excluding non-operational expenses, while profit margin includes all expenses. This makes EBITDA margin better for comparing operational efficiency across companies.