QualityInc. ROIC#36
EBITDA Margin is the metric used to how efficiently a company converts capital into earnings.
By Javier Sanz, Founder & Lead AnalystEditorially reviewed
Last updated: Reviewed by: Javier Sanz
Formula
Change in NOPAT / Change in Invested Capital x 100
Description
Measures the return generated on new capital invested in the business during the most recent period. While ROIC shows the average return on all capital, incremental ROIC reveals whether the marginal investment is creating or destroying value. This is critical for assessing whether growth is value-accretive.
Interpretation
Above 15% is strong. Incremental ROIC above total ROIC means the company is investing at higher returns than its historical average, which is bullish. Declining incremental ROIC may signal diminishing returns on growth spending.
Related metrics: Return on Equity (ROE). (Updated 2026)
Further Reading
- SEC EDGAR primary filings on EBITDA Margin- Primary source filings used to calculate EBITDA Margin.
FAQ
How is EBITDA Margin calculated?+
EBITDA Margin uses the formula: Change in NOPAT / Change in Invested Capital x 100. compare against sector median on /screener with the Sector filter applied. ValueMarkers refreshes the calculation within 24 hours of each new SEC filing using SEC EDGAR 10-K + 10-Q filings (segment-level disclosures).
What is a good EBITDA Margin value by sector?+
There is no single 'good' value for EBITDA Margin — context is sector-driven. compare against sector median on /screener with the Sector filter applied. The /screener exposes sector-relative percentiles for EBITDA Margin on every ticker, so you can compare against the sector median rather than the broad-market median.
Which investors use EBITDA Margin?+
Charlie Munger, Joel Greenblatt, Terry Smith cite EBITDA Margin as a key input to to find compounders with durable economic moats. The academic anchor is Greenblatt (2005) Magic Formula and Mauboussin (2014). ValueMarkers weights this within the Quality pillar of the VMCI score (30% of total).
What are the limitations of EBITDA Margin?+
EBITDA Margin can mislead in asset-light businesses where conventional capital ratios mislead. Pair EBITDA Margin with at least two cross-checks from other VMCI pillars — for example, free cash flow trend, balance-sheet quality, and earnings consistency — before drawing a single-metric conclusion.
Where can I see live EBITDA Margin data?+
Visit any /stock/[ticker] page on ValueMarkers to see live EBITDA Margin data, sector percentiles, and the VMCI composite score that integrates EBITDA Margin with 119 other indicators across 100,000+ stocks. The free /screener exposes EBITDA Margin as a filterable column.
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Related Quality Indicators
Return on Equity (ROE)Op Margin
Return on Equity measures how efficiently a company converts capital into earnings.
Return on Assets (ROA)Net Margin
Return on Assets is the metric used to how efficiently a company converts capital into earnings.
Return on Invested Capital (ROIC)EBITDA Margin
Return on Invested Capital measures how efficiently a company converts capital into earnings.
Return on Capital Employed (ROCE)FCF Margin
Return on Capital Employed is the metric used to how efficiently a company converts capital into earnings.
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