QualityInterest Cov#45
Gross Margin Trend 5Y measures how efficiently a company converts capital into earnings.
By Javier Sanz, Founder & Lead AnalystEditorially reviewed
Last updated: Reviewed by: Javier Sanz
Formula
EBIT / Interest Expense
Description
Measures how easily a company can pay interest on its outstanding debt from operating earnings. Benjamin Graham considered this one of the most important safety metrics. It answers: "How many times over can the company cover its interest payments?"
Interpretation
Above 5x is comfortable. Above 10x is very strong. Below 2x is risky and suggests the company may struggle to service debt in a downturn. Graham required at least 5x for industrial companies in his defensive investor criteria.
Related metrics: Return on Equity (ROE), Return on Assets (ROA), Return on Invested Capital (ROIC). (Updated 2026)
Further Reading
- SEC EDGAR primary filings on Gross Margin Trend 5Y- Primary source filings used to calculate Gross Margin Trend 5Y.
FAQ
How is Gross Margin Trend 5Y calculated?+
Gross Margin Trend 5Y uses the formula: EBIT / Interest Expense. 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 Gross Margin Trend 5Y value by sector?+
There is no single 'good' value for Gross Margin Trend 5Y — context is sector-driven. compare against sector median on /screener with the Sector filter applied. The /screener exposes sector-relative percentiles for Gross Margin Trend 5Y on every ticker, so you can compare against the sector median rather than the broad-market median.
Which investors use Gross Margin Trend 5Y?+
Charlie Munger, Joel Greenblatt, Terry Smith cite Gross Margin Trend 5Y 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 Gross Margin Trend 5Y?+
Gross Margin Trend 5Y can mislead in asset-light businesses where conventional capital ratios mislead. Pair Gross Margin Trend 5Y 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 Gross Margin Trend 5Y data?+
Visit any /stock/[ticker] page on ValueMarkers to see live Gross Margin Trend 5Y data, sector percentiles, and the VMCI composite score that integrates Gross Margin Trend 5Y with 119 other indicators across 100,000+ stocks. The free /screener exposes Gross Margin Trend 5Y as a filterable column.
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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