Key Takeaways
- Measures last 12 months of financial data.
- Adjusts fiscal year data with recent quarters.
- Smooths seasonality for consistent performance view.
- Used for valuation and peer comparisons.
What is Last Twelve Months (LTM)?
Last Twelve Months (LTM), also called Trailing Twelve Months, refers to the most recent 12-month period used to measure a company’s financial performance, such as revenue or earnings. It provides an up-to-date snapshot by combining the latest quarterly data with the prior fiscal year figures.
This metric helps you evaluate companies across different fiscal calendars, smoothing out seasonal or short-term fluctuations for clearer comparisons.
Key Characteristics
LTM offers a dynamic and standardized way to assess financial trends. Key features include:
- Rolling Period: Reflects the most recent 12 months rather than a fixed fiscal year, supporting timely analysis.
- Data Smoothing: Combines quarterly and annual data to reduce volatility and seasonal effects, a concept related to data smoothing.
- Versatility: Commonly applied to metrics like revenue, EBITDA, and EPS to aid valuation and performance tracking.
- Comparability: Enables investors to compare companies like those in the large-cap stocks space regardless of fiscal year differences.
How It Works
To calculate LTM, you add the most recent year-to-date data to the prior full fiscal year total, then subtract the overlapping prior year-to-date period. This method ensures the 12-month window moves forward continuously.
This approach is especially useful when analyzing companies like LTM that report quarterly, allowing you to maintain an updated financial view without waiting for year-end results. The formula helps you track trends while adjusting for reporting periods.
Examples and Use Cases
Understanding LTM is essential across industries and investment styles. Here are some common applications:
- Airlines: Delta and American Airlines use LTM metrics to smooth out seasonal travel variations and gauge recent performance.
- Dividend Analysis: Investors seeking reliable income often review LTM dividend payouts to assess consistency, linking to strategies found in best dividend stocks.
- Macroeconomic Trends: Analysts incorporate LTM data when evaluating broader macroeconomics impacts on company earnings and market segments.
Important Considerations
While LTM provides a clearer, up-to-date financial picture, it excludes forward-looking guidance, so you should complement it with projections when available. Also, be aware that abrupt changes in quarterly performance can still affect the trailing data.
Using LTM alongside other tools, such as the C-suite insights and range analysis, can strengthen your investment decisions and valuation accuracy.
Final Words
LTM offers the most current view of a company’s financial health by capturing the latest 12 months of performance. Use LTM data to compare peers or assess valuation multiples for more accurate decision-making. Next, incorporate LTM metrics into your financial models to refine forecasts and investment analysis.
Frequently Asked Questions
Last Twelve Months (LTM), also called Trailing Twelve Months (TTM), refers to the most recent 12-month period of a company's financial performance. It includes metrics like revenue, EBITDA, or EPS, regardless of the company's fiscal year-end.
LTM is calculated by taking the last full fiscal year metric, adding the most recent year-to-date (YTD) metric, and subtracting the prior year YTD for the same period. This adjustment aligns the data to represent a continuous 12-month timeframe.
Analysts use LTM because it provides a more current and standardized snapshot of financial performance, smoothing out distortions caused by differing fiscal year-ends, seasonal fluctuations, or one-time events.
Common LTM metrics include revenue, EBITDA, earnings per share (EPS), and dividends. These help in valuation, performance tracking, and computing important ratios like P/E and dividend yield.
LTM figures are key in M&A pricing and valuation multiples since they reflect the latest operating performance. Using LTM EBITDA or revenue ensures that evaluations capture the most recent trends and avoid outdated fiscal year data.
Yes, LTM smooths out seasonal variations by covering a full 12-month period, providing a clearer view of annual performance. For example, it balances low sales quarters with peak periods for more accurate trend analysis.
LTM data is updated quarterly with the latest filings such as 10-Qs and 10-Ks, offering a more current financial snapshot than annual reports alone.
No, LTM reflects historical performance over the past 12 months. For future projections, analysts use Next Twelve Months (NTM) estimates instead.
