EBIT Margin

How to read it

stockrow divides EBIT, earnings before interest and taxes, by revenue for the same period. The margin rises when revenue grows faster than operating costs, when prices go up or when costs are cut, and falls when costs such as materials, wages, research or selling expenses grow faster than sales. Because interest and taxes sit below EBIT, the margin reflects the business’s operations rather than how it is financed or where it pays tax. stockrow shows it for the trailing twelve months, for each quarter and for each fiscal year.

What is typical

Margins differ widely by kind of business. Software, pharmaceutical and strong-brand companies with pricing power tend to earn wide margins, while grocers, distributors, airlines and contractors work on thin ones and rely on volume. Compare the figure with the median for the company’s sector rather than across industries.

Pitfalls

EBIT can include one-off items such as restructuring charges, impairments or gains on asset sales, which make a single period look much better or worse than the underlying business. A single quarter can be distorted by seasonality, so the trailing-twelve-month figure is steadier. When revenue is very small, the margin can swing to extreme values.