====== EBIT Margin ======
EBIT Margin (also known as Operating Margin) is a key profitability ratio that reveals how much profit a company makes from its core business operations for every dollar of sales. Think of it as a pure measure of a company’s operational horsepower. It’s calculated by taking a company's [[EBIT]] (Earnings Before Interest and Taxes) and dividing it by its total revenue. By ignoring the effects of debt (interest) and government policies (taxes), the EBIT Margin allows investors to cut through the noise and see how well the business itself is actually performing. This is incredibly useful for comparing the fundamental operational efficiency of different companies, even if one is loaded with debt and the other is debt-free, or if they operate in different tax jurisdictions. For a [[value investing]] enthusiast, a high and stable EBIT Margin is often a hallmark of a wonderful business with a strong competitive advantage.
===== Why EBIT Margin Matters to Value Investors =====
For those who hunt for quality businesses at fair prices, the EBIT Margin is a treasure map. It goes beyond simple revenue growth and tells you about the //quality// of a company’s earnings. A business that consistently boasts a high EBIT Margin is likely doing something very right.
This single percentage can tell you a lot about a company's competitive standing, or what [[Warren Buffett]] would call its [[economic moat]]. A wide and sustainable moat—built on a strong brand, unique technology, or network effects—allows a company to charge more for its products and keep its costs in check, resulting in a healthy margin. It's the difference