Given an EBITDA-based valuation, how much value is driven by changes in COGS and SG&A on the company’s P&L.
Module Category: P&L and Operational Drivers
Key Concept: In companies with EBITDA-based enterprise valuations, EBITDA margins (EMs) can be expressed as the difference between a gross profit margin (GM) and an operating expense margin (OM). This allows analysts to break EBITDA Margin Expansion (see Module 11) into Gross Margin Expansion (driven by changes in company COGS) and Operating Margin Reduction (driven by changes in company SG&A).