Definition of EBITDA Margin

A measurement of a company’s operating profitability. It is equal to earnings before interest, tax, depreciation and amortization (EBITDA) divided by total revenue. Because EBITDA excludes depreciation and amortization, EBITDA margin can provide an investor with a cleaner view of a company’s core profitability.

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A firm with revenue totalling $125,000 and EBITDA of $15,000 would have an EBITDA margin of $15,000/$125,000 = 12%. The higher the EBITDA margin, the less operating expenses eat into a company’s bottom line, leading to a more profitable operation.

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