{"id":3368,"date":"2018-10-22T09:00:24","date_gmt":"2018-10-22T03:30:24","guid":{"rendered":"http:\/\/capitalante.com\/?p=3368"},"modified":"2020-03-08T11:52:54","modified_gmt":"2020-03-08T06:22:54","slug":"how-to-pick-best-stocks-by-ebitda-margin","status":"publish","type":"post","link":"https:\/\/capitalante.com\/how-to-pick-best-stocks-by-ebitda-margin\/","title":{"rendered":"How to Pick Best Stocks by EBITDA Margin"},"content":{"rendered":"

Apart from fundamental analysis or technical analysis or qualitative analysis of stocks one of the important matrices is EBITDA margin while determining the health of a company. The EBITDA stands for Earnings before Interest Taxes before Depreciation and Amortization. EBITDA or EBITDA margin<\/strong> can be used as an instrument or method to find out a company\u2019s or a stock\u2019s net profit among its gross profit. This EBITDA is a measurement as a percentage of total revenue earned by a company. It is figured out by dividing total revenue. In this platform today, we will learn what EBIBTDA<\/g> margin is. We will also know how to pick best<\/g> stocks by EBITDA margin.<\/span><\/p>\n

Income \/ Revenue<\/strong><\/span><\/h6>\n

You, of course, are familiar with what income or revenue is. The vital matter is what the source of income or revenue a company adopts. For example, Titan Company sells watches, jewellery etc. By selling these products Titan Company gets its income or revenue. Again, let\u2019s take the example of TCS or Infosys. They provide technical services or develop software and by doing so they create their revenue. This is their source of income or revenue.<\/span><\/p>\n

Interest<\/strong><\/span><\/h6>\n

Interest is the column which reveals how much amount a company spends as charges on its debts either in short term or long term. You should check whether the company you wish to invest in pays any interest. You should confirm whether the company pays off interest in an increasing<\/g> order. If the interest paid increases, there may be two possibilities. The first one is the company is trying to clear out the debt and it will be debt free in the near term. The second one is the company has a tendency to borrow money from the market. This indicates a clear signal of staying away from this type of companies.<\/span><\/p>\n

Tax<\/strong><\/span><\/h6>\n

According to companies act, 1956 of Income<\/g> Tax Act, a company is subject to pay income tax @30% on its profit earned during any quarter or year. The company has to pay advance tax for every quarter. If the advance taxes are increasing then it is the clear sign that the company has delivered robust performance on quarterly<\/g> basis or year-on-year basis.<\/span><\/p>\n

Depreciation<\/strong><\/span><\/h6>\n

Depreciation is a reduction in valuation<\/g> of a product or item. It may be anything plants, factories, furniture, machinery, cars, computers and many more. Depreciation takes place due to normal use and the course of time. Suppose, a company owns a machine which has provided proper services throughout the period. During the course of time<\/g> its productivity and valuation have reduced. This is depreciation. Now, the machine will be obsolete in future<\/g>. There is much machinery owned by a company is subject to depreciation. You should focus on the depreciating assets or items of a company. As an investor, you should check the depreciating condition of machinery. It is wise to select such companies whose the rate of depreciation of machinery is low or very slow.<\/span><\/p>\n