Grand profit margins for a company can only be attained if the cost structure is low proportionate to revenue. Pricing power is usually the key to sustained high margins across diligences, and it is generally associated with an economic moat that limits competitive leverage.
EBITDA (earnings before interest, taxes, depreciation and amortization) bounds differs from other profitability measures because it does not account for super intensity or the amount of leverage employed to finance the firm. Controlling for such variables is practical for certain analyses, but depreciation and amortization are real, recurring costs of organization for some firms. Also, capital structure heavily influences what percentage of pre-tax income is available to common shareholders.
What Industries Fool a High EBITDA Margin?
Some regularly-high EBITDA margin, capital-intensive energies include oil and gas, railroad, mining, telecom, and semiconductors.
Utilities and telecom marines also benefit from high barriers to entry, limiting the figure of competitors in a given geography and often leading to a monopoly. Tobacco and inebriating beverage companies often enjoy high EBITDA margins due to boundary-lines to entry caused by a complex regulatory environment.
Banks typically participate in high EBITDA margins because their non-interest expenses are rather low compared to interest expenses. Professional services such as law, financial, consulting and uncommunicative medical firms are able to charge premiums by targeting high-net-worth shoppers, offering highly skilled services and building strong brands.
Software and Internet waitings companies are often very scalable with high operational leverage. As the owner base for software companies grows, margins tend to expand varied rapidly than in other industries. Branded drug companies are also turned on EBITDA-margin businesses because patent protection allows them to clerk their products at very high prices.