EBITDA margin and valuation: how buyers read your profitability
The profitability lens. EBITDA margin tells a buyer how much of your revenue turns into operating profit, and how close you are to funding your own growth.
By Crispa · 5 min read · Updated June 2026
The short answer: EBITDA margin is the profitability lens. It measures how much of each DKK of revenue is left as operating profit, and it tells a buyer whether your business can eventually fund itself. In the 2025 SaaS data it moves in steps rather than a smooth slope: Companies cluster near 4.4 to 4.6x revenue until they pass roughly 20% margin, where the multiple jumps to about 6.3x.
Lens three of four. EBITDA margin is the lens buyers use to judge profitability, and it explains why a loss-making company is not punished the way founders expect. New here? Start with the four-lens valuation guide.
What EBITDA margin measures
In plain termsEBITDAa simple measure of operating profit: earnings before interest, tax, depreciation and amortization.
As a margin, it is the share of each DKK of revenue that survives as operating profit. A positive margin means the core business makes money before financing and accounting effects; a negative one means it still spends more than it earns to operate. Watch out for "adjusted" EBITDA, where a company adds back some of its costs to make its profit look bigger. Buyers expect this and check it closely, so keep your numbers clean.
How buyers read it
EBITDA margin is the clearest proof that a business can stand on its own. A buyer reads it as the bridge between two stories: a company that funds growth by raising money, and one that funds growth from its own profit. The higher and more durable the margin, the less a buyer has to lean on forecasts, and the more they will pay for what is already in front of them. That is why profitability becomes a valuation lever in its own right as a company matures.
A quirk in the 2025 data: the 20% step
One pattern in the 2025 SaaS data is worth knowing, with a caveat: It reflects how buyers priced software that year, not a universal law of finance. The multiple does not rise smoothly with profitability. It holds roughly flat, then steps up near a 20% margin.
The EBITDA margin step
Below 20%, the revenue multiple barely moves with profitability. At 20% it steps up. The threshold marks a change in how buyers categorize the business. This is a 2025 SaaS pattern, not a universal law.
Median EV/TTM revenue by cohort. Source: SEG 2026 Annual SaaS Report (4Q25 medians).
Here is the striking part: A company losing money (about 4.6x) and one at a 15% margin (about 4.4x) sit close together. The real jump comes above 20%, at about 6.3x. Below that line, buyers see you mainly through the growth lens. Above it, you have proven you can throw off real cash. You are no longer just a growth story, you are a self-funding asset. That change in how you are seen is the step.
Real example: Pleo. Pleo's EBITDA margin was about −42% in 2024, deep in the growth-story zone, but climbing fast from roughly −150% in 2022. The improvement continued into 2025: Revenue grew about 25% to nearly DKK 968m while the loss held roughly flat at about DKK 341m, narrowing it to around a third of revenue, with management guiding to breakeven by 2027. A buyer would not punish the negative margin much today. What they would watch is how quickly it is rising toward profit, and how far the 20% step still is.
Two things follow. While you are below the step, most of your value still comes from growth, so that is usually where to push. But profitability matters before any threshold: A steadily rising margin tells buyers the model works and reduces how much they have to take on trust. Treat the 20% figure as where 2025 buyers happened to re-rate these businesses, not a magic line. The direction and durability of your margin matter more than hitting one number.
Frequently asked questions
Can a company with negative EBITDA still get a good valuation?
Yes. Below roughly 20% EBITDA margin, buyers value the business mainly on growth, so a loss-making fast grower and a modestly profitable company trade at similar multiples (about 4.4–4.6x). Negative EBITDA isn't heavily penalised if the growth story is strong.
Why does crossing 20% EBITDA margin matter so much?
Below 20%, the business is still a growth story; above it, it has proven it can generate real cash and becomes a self-funding asset. That shift in how buyers see you is why the multiple steps up rather than sloping.
What EBITDA multiple do software companies trade at?
On a revenue basis, software businesses tend to sit around 4.4–4.6x revenue below 20% EBITDA margin, stepping up to roughly 6.3x once they clear 20%.
Pleo annual reports (Pleo Holding ApS, CVR 39 11 41 27), including FY2025: net revenue DKK 968m, up 25% from DKK 776m; deficit DKK 341m; breakeven guided to H1 2027. FY2025 figures reported by NKP | M&A Insights and Danish business press. The Pleo figures used as the worked example.
Crispa valuation analysis. The four-lens method used across this series.
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