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Profit margin - key figures simply explained

Profit margin is the company's profit before interest and tax (EBIT) in relation to the company's sales.
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Definition: profit margin

A company's earnings before interest and taxes (EBIT - Earnings Before Interests and Taxes) in relation to the company's sales. The data for the last year reported is used for the calculation.

Significance for the evaluation

The pre-tax profit margin expresses how profitable a company is. A high margin is a sign of high profitability. Inexpensive manufacturing companies can achieve higher margins more easily than companies with a high cost pool. Note: This ratio does not apply to financial stocks.

Calculation

Pre-tax profit margin in % = (EBIT / sales) * 100

Rating

+1 point: pre-tax profit margin> 12%
0 points: pre-tax profit margin between 6% and 12%
-1 point: pre-tax profit margin <6%

Example

Lufthansa (02/10/2017): pre-tax profit margin = 6.85 % -> 0 points

 

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