Every quarter, companies publish results. Analysts debate. Stock prices move. But if you don't understand what Revenue, EBITDA, PAT, and EPS actually mean — you're reacting to noise, not signal.
This article changes that.
The Journey of a Rupee
Imagine Zomato delivers 10 lakh orders today. Each order brings in ₹300. That's ₹30 crore in revenue — in a single day.
But how much of that ₹30 crore actually reaches you as a shareholder?
Not much. That rupee travels through five toll booths before it becomes EPS. At each step, a chunk is deducted. Understanding those deductions is the entire game of reading a P&L statement.
Revenue (Top Line) ← What the company SOLD
− Cost of Goods Sold (COGS) ← Direct cost to produce/deliver
= Gross Profit
− Operating Expenses (OPEX) ← Salaries, rent, R&D, marketing
= EBIT (Operating Profit)
+ Depreciation & Amortization ← Added back (non-cash charge)
= EBITDA
− Interest ← Cost of debt
− Tax ← Government's share
= PAT / Net Profit (Bottom Line)
÷ Total shares outstanding
= EPS (Earnings Per Share) ← Profit per share you own
Revenue — The Top Line (Not the Full Story)
Revenue is what the company earned from selling its product or service, before any costs.
For TCS, revenue = billing to IT clients. For Zomato, revenue = platform fees + delivery charges. For Sun Pharma, revenue = drug sales.
The trap: treating revenue growth as the final verdict.
"Zomato revenue grew 70%!" — but if costs grew 90%, the company went deeper into losses. Revenue growth without profitability context is dangerous information. Always ask: what happened to profit while revenue was growing?
Gross Profit & Gross Margin — The First Filter
Gross Profit = Revenue − COGS
COGS is the direct cost of delivery. For Zomato: delivery partner payments and cloud infrastructure. For a pharma company: raw materials and manufacturing.
Gross Margin = Gross Profit / Revenue × 100
Infosys has gross margins of ~32-35% — employees are the primary cost. HUL has gross margins of 45-50% — brand value lets them charge premium prices.
If gross margins are declining, the company is either facing pricing pressure or rising input costs it can't pass on. Both are warning signs. Improving gross margins over time signal pricing power — one of the most valuable qualities a business can have.
EBITDA — What Analysts Actually Compare
Subtract OPEX (management salaries, rent, marketing, R&D) from gross profit and you get EBIT — the operating profit of the core business.
Now add back Depreciation & Amortization — the non-cash accounting charge for assets wearing down over time. If TCS buys a server for ₹1 crore, accounting spreads that over 5 years as ₹20 lakh/year depreciation — even though the cash was already paid. Adding it back gives EBITDA.
EBITDA Margin = EBITDA / Revenue × 100
Why does the industry use EBITDA so heavily?
- Comparable across companies — strips out different debt levels and tax rates
- Closer to actual cash generated from operations
- Removes accounting choices around depreciation methods
TCS has held a 24-26% EBITDA margin consistently for nearly a decade. That consistency signals pricing power and operational discipline.
Sector benchmarks:
- IT Services: 22-28% | FMCG: 18-25% | Telecom: 35-45% | E-commerce at maturity: 5-15%
PAT — The Bottom Line
From EBIT, subtract interest (cost of debt) and tax (India's corporate rate: ~22%).
PAT = EBIT − Interest − Tax
PAT is what's left after everyone has been paid — lenders, government, employees. It belongs to shareholders.
Why PAT can fall even when revenue rises:
| Scenario | What Happened |
|---|---|
| Revenue +20%, PAT −10% | Interest costs surged (new debt taken) |
| Revenue +15%, PAT +5% | Margins compressed, costs rose faster |
| Revenue +10%, PAT +30% | Operating leverage kicked in, margins expanded |
The divergence between revenue and PAT growth is where the real story lives.
PAT Margin = PAT / Revenue × 100
Of every ₹100 the company earned, how many rupees became profit?
Benchmarks: IT (TCS, Infosys): 18-22% · FMCG: 12-18% · Auto: 3-8% · E-commerce (Zomato in early years): negative
The Zomato story: Revenue grew 70%+ for years, but PAT was deeply negative — food delivery requires massive upfront investment in infrastructure and discounts to build habit. Then in FY2024, PAT turned positive and margins started expanding rapidly. That was the signal serious investors had been waiting for — not the revenue growth (which was always there), but the margin inflection.
EPS — Connecting Profit to Your Share
EPS = PAT ÷ Total Shares Outstanding
You own shares, not a percentage of PAT. EPS converts total profit into what's attributable to each share you hold.
If TCS earns ₹50,000 crore in PAT across ~370 crore shares: EPS ≈ ₹135/share.
This connects directly to valuation: PE = Stock Price / EPS. If EPS grows and PE stays constant, the stock price must rise. EPS growth is the heartbeat of long-term stock performance.
When EPS grows faster than revenue, margins are expanding. When EPS grows slower, costs are outrunning the business.
Watch for dilution: New share issuances (QIP, ESOP, rights issue) increase shares outstanding, which can depress EPS even when PAT grows. Always look at diluted EPS, not basic EPS.
The Two Companies Test
Company A — "High-growth startup" Revenue ₹2,000 crore (+20% YoY) · EBITDA Margin 8% (was 14%) · PAT: ₹−200 crore (loss)
Company B — "Boring mid-cap manufacturer" Revenue ₹1,500 crore (+10% YoY) · EBITDA Margin 22% (was 19%) · PAT: ₹180 crore (12% margin)
Headlines say Company A is the winner. But Company B is the better business — it's profitable, margins are expanding, and it has pricing power and cost discipline. Company A is buying growth at the cost of profitability, which cannot continue indefinitely.
This is why professional investors read the full P&L — not just the top line.
How StockMirror Brings This to Life
Reading a P&L statement teaches you what these metrics mean. But a quarterly earnings call tells you why they moved — and whether those moves are going to last.
When you open any company's earnings page on StockMirror, the top of the page shows five numbers immediately: Revenue Growth YoY, Revenue Growth QoQ, EBITDA Growth YoY, EBITDA Margin, and PAT Growth YoY. These are the exact metrics from this article — live, for every listed Indian company.
Below those numbers, the Margins Category signal tells you at a glance whether margins expanded or contracted this quarter. Dig deeper and you'll see the primary drivers — for example, whether the margin expansion came from operating leverage (a structural improvement) or a one-time cost reduction (which won't repeat). Each driver is tagged LikelyRepeatable or OneTime — so you know whether to trust the trend.
If you follow multiple companies, doing this manually every quarter is time-consuming. StockMirror's AI Analyst lets you ask across your entire watchlist in plain language — "which of my companies had PAT margin expansion this quarter?" — and get a synthesised answer without opening a single filing. Add companies you want to track to your Watchlist on StockMirror so you never miss a quarterly result.
See the P&L signals for any Indian company this quarter → stockmirror.in
Next in the series: The Growth Story — CAGR, Margin Expansion & Operating Leverage
Frequently Asked Questions
What is EBITDA and why is it used?
EBITDA = Earnings Before Interest, Tax, Depreciation, and Amortisation. It measures operating profitability before financing and accounting choices distort the number. Companies with different debt levels or asset ages become comparable on EBITDA. It is widely used for EV/EBITDA valuation, debt coverage analysis, and cross-sector comparisons.
What is the difference between PAT and EPS?
PAT is the total net profit in rupees — what the whole company earned. EPS divides PAT by shares outstanding — your per-share slice of that profit. EPS is more actionable for investors because it accounts for dilution. A company can grow PAT while EPS stays flat if it issues new shares. Always check both.
What is a good EPS growth rate for Indian stocks?
15–20% annually is healthy. Above 25% is strong. The best signal is EPS growing faster than revenue — that means margins are expanding, not just revenue. EPS growing through share buybacks rather than genuine profit improvement needs scrutiny — the per-share number rises but no real value is being created.
Why do companies report EBITDA if PAT is the real profit?
EBITDA strips out depreciation (which varies with asset age and accounting choices) and interest (which depends on financing decisions). This gives a view of operating earnings power independent of how management structured the balance sheet. Investors use EBITDA for comparisons and valuation multiples, PAT for the final profitability check.
How do I read a quarterly earnings result quickly?
Five numbers, in order: (1) Revenue growth year-on-year — is the top line expanding? (2) EBITDA margin — is profitability per rupee of sales improving? (3) PAT — is bottom-line profit up? (4) EPS — per-share earnings after any dilution? (5) Management guidance — what tone did they strike on the next quarter? These five answer 80% of what an investor needs to know in under five minutes.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Always do your own research before making investment decisions.