Earnings before interest, taxes, depreciation & amortisation (EBITDA) measures the company’s operating performance. It is calculated as revenue minus operating costs excluding depreciation and amortisation costs.
1Y Forward EBITDA Growth is calculated as the percentage change between estimated EBITDA for the current financial year and actual EBITDA for the most recently reported financial year. As the data item is based on analysts estimate of EBITDA for the current financial year, the growth estimate, during the year, will change depending on the analyst’s outlook of EBITDA.
When expanding its business, a company should also seek to expand its operating profitability. If the revenue of the company grows at a fast pace without commensurate growth in EBITDA, EBITDA margin will fall leading to lowered net profit margin as well.
Suppose in year 1, the revenue of the company was Rs.100 and EBITDA was Rs.30. EBITDA margin during the year would be (30/100) 30%. In year 2, revenue of the company grows by 10% to Rs.110, whereas EBITDA grows only by 5% to Rs.31.5. EBITDA margin during the year is now 28.6%. However if the EBITDA had also increased by 10% to Rs.33, EBITDA margin would have been (33/110) 33%. It is important to seek out companies whose EBITDA growth is at least the same as its revenue growth rate, if not more.