Margins and returns: what the metrics mean
How much of each dollar of revenue is left as profit, and how much profit the business earns on its capital and assets.
Gross Profit Margin (TTM) — gross margin
How many cents of each sales dollar remain after direct costs — before office salaries, advertising, interest and taxes. This is the ceiling for all other profitability: a low gross margin leaves room for nothing, and no office savings can replace it.
EBIT Margin (TTM) — operating margin
The share of sales that makes it to operating earnings: after costs, salaries, advertising and depreciation, but before interest and taxes. Shows the efficiency of the business itself, without the effect of debt and jurisdiction.
EBITDA Margin (TTM) — EBITDA margin
The same, but without subtracting depreciation. For a capital-heavy company the gap with EBIT is large, and relying on EBITDA alone is dangerous: the wear of equipment still has to be paid for in cash.
In detail, with an example →Net Income Margin (TTM) — net margin
How much of each sales dollar is left for the shareholder after everything — costs, expenses, interest on debt and taxes.
Levered FCF Margin (TTM) — free cash flow margin
Free cash flow after interest on debt, divided by sales. The most demanding of the margins: it counts cash rather than earnings and subtracts capital spending. Consistently positive — the company funds itself.
In detail, with an example →Return on Common Equity (TTM) — return on equity
How much profit each dollar belonging to shareholders brings. The trap is in the denominator: buybacks and past losses shrink equity and inflate ROE, which is why it is read next to ROA and debt.
In detail, with an example →Return on Total Capital (TTM) — return on all capital
The return on all the money invested in the business — both own and borrowed. Unlike ROE it cannot be improved just by taking on more debt, which is why it comes closest to the question “is this a good business”.
Return on Total Assets (TTM) — return on assets
Profit per dollar of all the company's property. Shows how productively the balance sheet works; banks and retailers have completely different norms, so the comparison is within the sector.
CAPEX / Sales (TTM) — capital spending to sales
What part of sales has to go back into equipment and construction. The rating counts a high value as a plus — an investment in future growth; for a mature business the same figure reads the other way: it is the price it pays just to stay in place.
Asset Turnover Ratio (TTM) — asset turnover
How much in sales each dollar of assets brings in. A retailer has high turnover on a thin margin, a factory the opposite; profitability comes from multiplying the two.
Cash From Operations (TTM) — operating cash flow
Real cash that came from the core business over the year, as shown in the cash flow statement. Earnings are the accountant's opinion, cash flow is a bank statement fact; when they diverge for a long time, trust the cash flow.
Net Income Per Employee (TTM) — profit per employee
Net income divided by headcount. A rough but telling measure of how well the business scales without hiring: for software it is several times higher than for a service company of the same size.