EBIT growth

EBIT growth measures how much a company's operating income expanded or contracted compared to a prior period, usually the same quarter or year one year earlier.

The formula is:

EBIT growth shows whether the core business is earning more from its operations, before interest and taxes. When it runs ahead of revenue growth, the company is turning each extra dollar of sales into more profit, a sign of operating leverage. When it trails revenue growth, costs are rising faster than sales, and the reason behind that is the thing to investigate.

Unlike EBITDA growth, EBIT growth includes depreciation and amortization, so it reflects the cost of the assets a company has built or bought. For businesses that spend heavily on equipment or data centers, the two can diverge sharply as new spending starts to depreciate.