What Does EBITDA Margin Mean?
Formula: Operating Profits/ Net sales.
EBITDA Margin is also known as operating margin. It is a ratio which is used to determine operating efficiency of the company. The ratio is used to measure company’s operating profits i.e. what would be the earnings of the company after paying of fixed and variable costs of production. The higher the operating margins its good for the company as it has a higher income available to take care of its other fixed cost such as interest on debt. One must look at the operating margin ratio on Y-O-Y and Q-O-Q basis and also compare the same with the peer group.
What Does PAT Margin Mean?
Formula: PAT/ Net sales.
PAT margin is also known as net margins. It is a ratio which is used to determine the final earnings of the company on every one Rupee of sales generated. It is used to determine the net earnings of the company after paying the production as well as finance expenses. It is a useful tool in analyzing the company’s earnings after tax. For example, a company’s sales could rise, but if costs also rise, that leads to a lower profit margin than what the company had when it had lower profits. This is an indication that the company needs to curb its expenses.
What Does Earnings Per Share (EPS) Mean?
Formula: (PAT – Preference Share Dividend) / Total outstanding equity shares
EPS is the net earnings of the company allocated to each outstanding share of the company. An increasing trend in EPS shows that the company is performing better. While we are looking at the EPS we must also look at the Diluted EPS as it the equity may expand in future if there are convertibles or warrants outstanding in the outstanding shares number.
What Does Price-Earnings Ratio – P/E Ratio Mean?
Formula: CMP / Earnings Per Share (EPS).
PE i.e Price of earnings ratio is a valuation ratio of a company’s current share price compared to its per-share earnings. The P/E is also referred to as the "multiple", because it shows how much investors are willing to pay for per Rupee of earnings. For example, if a company is currently trading at Rs.100 a share and earnings over the last 12 months were Rs.10 per share, the P/E ratio for the stock would be 10 (100/10). EPS is usually from the last four quarters (trailing P/E), but when EPS is taken from the expected earnings of next four quarters then the PE is known as projected PE.
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