Trailing 12 months (TTM) is a financial term that refers to the performance metrics of a company measured over the latest 12 consecutive months. This concept is particularly relevant for investors and analysts as it provides an up-to-date snapshot of a company’s financial health, allowing for informed decision-making. Unlike traditional annual financial reports, which may contain outdated information, TTM delivers data that is both current and reflects the company’s ongoing operational dynamics.
Key Takeaways
- TTM Definition: TTM represents the financial metrics over the last 12 months, which do not necessarily align with the end of a fiscal year.
- Flexibility in Reporting: TTM allows analysts to assess financial performance regardless of when the company's fiscal year ends.
- Timeliness and Relevance: By focusing on recent data, TTM presents a seasonally adjusted view of performance, smoothing out inconsistencies and fluctuations that may occur in specific quarters.
- Importance for Stakeholders: TTM figures are crucial for investors looking to gauge a company’s growth trajectory, especially when comparing it to historical performance.
The Importance of TTM
Performance Analysis
Analysts and investors use TTM data extensively to evaluate a multitude of financial indicators, such as:
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Revenue: The TTM revenue shows how much money a company has generated in total over the past year. This helps to assess the company’s ability to grow its top line, which is critical for long-term success.
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Earnings Per Share (EPS): TTM EPS provides insights into a company's profitability and efficiency, showing how much profit is allocated to each share of stock over the last year.
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Price/Earnings (P/E) Ratio: The TTM P/E ratio is vital for assessing a stock's valuation compared to its earnings, helping investors decide if a stock is over- or under-valued.
Growth Insights
Analyzing TTM figures allows stakeholders to track a company's growth more effectively. For example, an impressive revenue increase from $500 million to $1 billion in just one year reflects substantial growth that can drastically influence investment decisions.
Calculating TTM Measures
Methods of Calculation
TTM metrics can be calculated in several ways depending on the specific financial measure being considered:
- Revenue: TTM revenue is calculated by adding the revenues of the last four quarters. For instance, if a company’s quarterly revenues are $29.4 billion, $33.5 billion, $30.0 billion, and $21.9 billion, the TTM revenue would be:
[ \text{TTM Revenue} = 29.4 + 33.5 + 30 + 21.9 = 87.8 \text{ billion} ]
- Yield: TTM yield is calculated based on the dividends received from investments over the past year divided by the investment’s current price. For example, if a stock priced at $100 pays a total of $0.40 in dividends over the last 12 months, the TTM yield would be:
[ \text{TTM Yield} = \frac{0.10 + 0.10 + 0.10 + 0.10}{100} = 0.4\% ]
- P/E Ratio: The TTM P/E ratio is determined by dividing the current share price by the TTM EPS.
Common Questions
Is TTM Similar to Last Twelve Months (LTM)?
Yes, the terms Trailing Twelve Months (TTM) and Last Twelve Months (LTM) are used interchangeably, referring to the same measurement period for financial metrics.
What is Trailing 12 Months Profit & Loss?
TTM Profit & Loss analysis refers to a continuous assessment of an investment's performance over the last 12 months, summing up the monthly or quarterly returns to provide a weighted average profit or loss figure.
The Bottom Line
TTM figures are crucial for understanding a company's financial trends and operating performance over the most recent year. By evaluating metrics such as revenue, EPS, dividend yield, and P/E ratio on a rolling basis, stakeholders can make more informed comparisons across similar companies and gauge industry performance. Understanding TTM is essential for anyone looking to analyze investments or assess financial health in a rapidly changing economic landscape.