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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