An EBITDA margin is an accounting method that calculates profitability as a percentage. When calculating an EBITDA margin, you first find the EBITDA. Then divide that by total revenue and convert the quotient into a percentage.nnEBITDA margin formula:nnEBITDA ÷ total revenue = EBIDTA margin.nnLet's say a company has an EBITDA of $450,000 on $3,000,000 in total revenue. The formula would look like this:nn$450,000 ÷ $3,000,000 = 0.15, which becomes 15%nnLet's look at how EBITDA margins create a better comparison than EBITDA alone.nnCompany A has a gross revenue of $2,000,000 with an EBITDA of $200,000.nnCompany B has a gross revenue of $1,500,000 with an EBITDA of $175,000.nnIt might appear Company A is more profitable. However, when we run the EBITDA margins, we see the following:nnCompany A: $200,000 ÷ $2,000,000 = 10% EBITDA margin.nnCompany B: $150,000 ÷ $1,500,000 = 12% EBITDA margin.nnWhen we look at the percentage, Company B has a higher profit margin and is likely the better investment.nnA good EBITDA margin is 10% or greater. Most S&P 500 companies have an EBITDA margin between 10%-14%.