What Does Trailing 12-Month (TTM) Mean? – Forbes Advisor

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Trailing 12 months (TTM) is a way of looking at the performance of a public company or a security over the last 12 months. A TTM reading of a firm’s price-to-earnings ratio, earnings or revenue, for instance, gives investors and analysts a handy way of analyzing data that’s not tied to the calendar year or a company’s fiscal year.

Financial news outlets commonly present TTM figures to show investors the most up-to-date numbers on companies and securities. Revenue and earnings-per-share (EPS) may be displayed as TTM to indicate they are measuring trailing 12 month figures.

What Does TTM Mean?

The abbreviation TTM is a measure of data over a 12-month period in the past. Typically a TTM period refers to the 12 months preceding the current month, or a 12-month period up to the firm’s most recent earnings report or other financial disclosure.

Think of TTM data as a 12-month ruler that companies and financial analysts use to measure recent performance—one that’s distinct from a company’s fiscal year, the current calendar year or a year-to-date (YTD) measure.

TTM is a highly flexible tool that can be applied to balance sheet figures, profit-and-loss statements, revenue and cash flow charts. Just remember, the 12-month period referred to by any given TTM data differs from one financial statement to the next.

“When looking at returns, trailing 12-months is often more instructive than simply looking at calendar years,” said Ted Haley, CFP, president and CEO of Advanced Wealth Management in Portland, Oregon. “But as with everything in finance, numbers can be misleading. For example, looking at returns 12 months after the low point of a crisis means that everything will look fantastic, but it won’t necessarily tell the whole story.”

Equity research analysts spend plenty of time pouring over quarterly and annual earnings reports, which unlike TTM measures are tied to the calendar quarter or calendar year. TTM, meanwhile, provides immediate, up-to-date current information on performance that’s seasonally adjusted.

Three Examples of TTM Measures

TTM can be applied to a wide range of financial data. Let’s take a look at how TTM is applied to revenue, yield and P/E ratios.

  • TTM revenue. A company’s total revenues from the last 12-month period. For a bank, this would be interest income and other fees, while for a manufacturing or retail firm it could be net sales. A TTM revenue measure provides annual a more accurate picture of recent performance than the firm’s last or quarterly revenue report, which could be months old already.
  • TTM yield. For a mutual fund or an exchange-traded fund (ETF), TTM yield is a measure of the percentage of income the security has returned to investors over the previous 12 months. For a fund, TTM yield is calculated by taking the weighted average of the yields that make up its portfolio of assets.
  • TTM price/earnings ratio. Also commonly referred to as trailing P/E, this measures a company’s P/E ratio over the previous 12 months. It’s calculated by dividing the current stock price by the per share (EPS) for the last four quarters. By looking at trailing P/E, investors can get a feel for how expensive or cheap a stock is compared to its earnings potential.

TTM and Corporate Financial Reporting

The TTM format is a key tool for companies performing financial planning, since it incorporates the most recent financial data that’s available. TTM is especially useful in evaluating things like working capital, revenue growth and profit margins, which may fluctuate throughout the year depending on seasonal factors.

For managers, TTM metrics provide an immediate view of a company’s financial health. Consistently examining the previous 12 months averages out ingredients such as seasonality, temporary volatility or one-time charges, offering a picture more representative of a company’s state at a given financial moment in time.

TTM and Equity Research

Public companies release financial reports on a quarterly basis in the form of securities filings. The part of these filings containing the financial statements features trailing 12-month metrics, updated quarterly per GAAP or generally accepted accounting principles.

“There’s no better gauge of a company’s prospects than how it’s performed over the last 12 months. TTM has stood the test of time as a powerful indicator of performance and potential,” said Larry Luxenberg, CFA, principal at New York-based Lexington Avenue Capital Management.

TTM is useful as a clear standard, since sometimes firms will provide monthly statements detailing sales volumes or performance indicators, whereas Securities and Exchange Commission (SEC) filings present quarterly or YTD financials.

How to Calculate TTM Figures

TTM figures are calculated using the most recent year-to-date (YTD) period, plus the last complete fiscal year minus the previous year’s year-to-date period. It’s important to use year-to-date, not just the latest quarter.

Here’s an example. It’s Q2 of 2021. Let’s say that ManufactCorp, a company whose business you’re analyzing, just reported revenues of $10 bn YTD, while their revenues for the previous year were $33 bn and last year’s YTD figure was $6 bn. You add 10 and 33 and subtract 6, getting $37 bn as the TTM revenue figure.

The Bottom Line on TTM

TTM is a popular metric not only because it covers a useful time frame, but because it’s simply a prerequisite. The standard window of analysis in finance is a full-year period, yet during three out of four periods each year, companies don’t report results for the entire year; only when they file a 10-K report with the SEC do we see figures for a 12-month period.

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