Term · Profitability & Growth
EBITDA Margin
In briefThe EBITDA margin relates earnings before depreciation and amortization to revenue. It is suitable for comparing capital-intensive small caps with differing depreciation levels.
Definition
Operating earnings before depreciation and amortization relative to revenue.
How it is calculated
Formula. EBITDA margin = EBITDA ÷ revenue × 100.
Why it matters for small caps
Useful for comparing capital-intensive small caps with differing depreciation and amortization levels.
Common misreadings
- It is often confused with the EBIT margin, even though with high depreciation (e.g., mining) the two can diverge significantly.
In the process
Frequently asked
What is the EBITDA margin?
It shows what share of revenue remains as earnings before interest, taxes, depreciation, and amortization. It is stated as a percentage.
When is the EBITDA margin especially useful?
With high depreciation, for example in mining or industry, it provides a fairer comparison than the EBIT margin. It isolates the operating spread before the depreciation effect.
Why must the EBITDA and EBIT margins not be confused?
With high depreciation, the two metrics diverge significantly. Anyone equating them overestimates the actual operating profitability.
Related terms
Sources
Primary
ESMA – Guidelines on Alternative Performance Measures
https://www.esma.europa.eu/document/esma-guidelines-alternative-performance-measures
https://www.esma.europa.eu/document/esma-guidelines-alternative-performance-measures
Methodology
U.S. SEC – Non-GAAP Financial Measures
https://www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/non-gaap-financial-measures
https://www.sec.gov/rules-regulations/staff-guidance/corporation-finance-interpretations/non-gaap-financial-measures
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.