Definition and Examples of TTM
How TTM is Used
What Does This Mean for Individual Investors
Definition and Examples of TTM
When reviewing a company’s revenues, profits, expenses, and other metrics, analysts seek to compare current figures with those achieved over the past 12 months, commonly referred to as Trailing 12 Months or TTM. Assessing various financial aspects of individual companies is an important component of investment purposes. When reviewing a company’s revenues, profits, expenses, and other metrics, analysts like to compare current figures with those achieved over the past 12 months, which are usually referred to as Trailing 12 Months or TTM.
TTM enables analysts to measure various performance metrics without waiting for the end of the financial or calendar year. Another benefit of reviewing results from TTM instead of the previous annual report is that you can compare similar months to each other, which is important in cases where a company’s sales are seasonal.
For example, if you are looking at a small company that makes kites, and its sales typically peak in spring and fall, potential investors or owners of the company could analyze the TTM by comparing income data from November 1 of the previous year to October 31 of the current year.
In this example, TTM is also beneficial when applied to privately-owned companies because it can be used by any party to assess whether the business is growing or at least maintaining the peak pace from the previous year. Additionally, TTM can be used by a potential buyer of a private company to see how sales have grown over the past 12 months.
Alternative name: Last 12 months
On the other hand, Last 12 Months (LTM) data aims to predict future performance, such as revenues or profits. This is particularly important if the company is launching a new product line, acquiring another company, or is in a high growth mode.
Note: Analysts use LTM data to try to predict the company’s short-term future financial performance.
How TTM is Used
To Measure Performance at Any Time of the Year
An important step in assessing a company’s financial health is to compare the current metric with the same metric from a previous period. TTM data allows analysts to identify fluctuations in important performance metrics such as revenues, sales, and profits. Any financial metric reported in the income statement or quarterly report can be analyzed, including expenses, price-to-earnings ratio, or profit analyses.
Qualifying for Loans
Financial institutions may find TTM results more reliable than year-to-date figures or data from the previous annual report when a business applies for a loan.
Analyzing Dividend Trends
TTM data allows analysts or investors to gain a deeper understanding of a company’s dividend distribution trends by comparing monthly or quarterly dividend payments over the studied 12-month period.
TTM Yield
Investors seeking steady income rather than growth like to compare the average yield of mutual funds or exchange-traded funds (ETFs) over the past 12 months. This is known as TTM Yield. There is no standard formula for calculating this, so it is important for investors to be aware of how each TTM yield is calculated to ensure they are comparing similar things.
Lagging TTM data is useful for analyzing and comparing investment options and also for business owners who wish to track business fluctuations over any 12-month period to change strategy or plan for the future.
What Does This Mean for Individual Investors
What it means for individual investors
There are many strategies for selecting individual companies to invest in. Many investors like to see that the company’s revenues and profits are trending upwards over the past 12 months and/or that its costs or debts are decreasing. TTM data with varying focuses allows investors to compare current performance with that of the previous 12 months. Among other things, this ensures that seasonal effects are taken into account, regardless of the 12-month period studied.
Taking the revenues for the last 12 months allows analysts to compare the company’s financial performance with the previous 12 months. Tracking and comparing the company’s performance over the past 12 months instead of the fiscal year or calendar year takes into account increases or decreases in seasonal sales. TTM data can measure everything from revenues, sales, and profits to expenses or dividend payments. TTM data is also used by accountants in non-public companies to assess financial stability and identify potential concerns or opportunities.
Key takeaways
- TTM data allows analysts to compare the company’s financial performance with the previous 12 months.
- Tracking and comparing the company’s performance over the past 12 months instead of the fiscal year or calendar year takes seasonal sales increases or decreases into account.
- TTM data can measure everything from revenues, sales, and profits to expenses or dividend payments.
- TTM data is also used by accountants in non-public companies to assess financial stability and identify potential concerns or opportunities.
Source: https://www.thebalancemoney.com/what-is-trailing-12-months-ttm-5192023
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