Trailing Twelve Months (TTM)

Trailing Twelve Months (TTM) is a financial metric that represents a company’s financial performance over the past 12 months. It’s a rolling calculation that takes into account the most recent four quarters of a company’s financial data.

TTM is also known as the “last 12 months” or “LTM” calculation.

How to Calculate Trailing Twelve Months

Calculating TTM is relatively straightforward. You’ll need to gather the following financial data for the past four quarters:

• Revenue
• Net Income
• Earnings Per Share (EPS)
• Other relevant financial metrics (e.g., operating income, cash flow)

Once you have this data, add up the values for each metric over the past four quarters. This will give you the TTM value for each metric.

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Why is Trailing Twelve Months Important?

TTM is a valuable metric for investors and financial analysts because it:

1. Provides a recent snapshot: TTM gives you a clear picture of a company’s recent financial performance, helping you understand its current trends and momentum.
2. Smooths out seasonality: By averaging data over 12 months, TTM helps to smooth out seasonal fluctuations, providing a more accurate representation of a company’s financial health.
3. Facilitates comparisons: TTM enables you to compare a company’s current performance to its past performance, as well as to industry peers and benchmarks.
4. Informs investment decisions: TTM can help investors make more informed decisions by providing a timely and accurate assessment of a company’s financial performance.

Common Uses of Trailing Twelve Months

TTM is commonly used in various financial applications, including:

1. Stock analysis: Investors use TTM to evaluate a company’s recent financial performance and estimate its future growth prospects.
2. Financial modeling: Financial analysts use TTM to build financial models and forecast a company’s future performance.
3. Credit analysis: Lenders and credit analysts use TTM to assess a company’s creditworthiness and determine its ability to repay debts.
4. Mergers and acquisitions: TTM is used to evaluate the financial performance of potential acquisition targets.

Trailing Twelve Months (TTM) is a powerful metric that provides valuable insights into a company’s recent financial performance. By understanding how to calculate TTM and its importance in financial analysis, investors and financial analysts can make more informed decisions and stay ahead of the curve. Whether you’re evaluating a stock, building a financial model, or assessing creditworthiness, TTM is an essential tool to have in your financial toolkit.