T-1

T-1 (pronounced 'T-minus-one') is a simple but powerful shorthand used in finance to refer to the time period immediately preceding the current one. In this notation, 'T' represents a specific point in time—it could be today, the end of the current financial quarter, or the date of a transaction. The '-1' signifies one period before that point. For example, if 'T' is the fourth quarter of the year, 'T-1' is the third quarter. If 'T' is today's stock price, 'T-1' is yesterday's. This concept is the backbone of historical analysis, allowing investors to quickly contextualize current data. By comparing the 'now' (T) with the 'just before' (T-1), we can measure change, calculate growth, and begin to understand the direction a company or a market is headed. It's the first step in moving from a static snapshot to a dynamic story.

For value investors, understanding a business's history is non-negotiable. The T-1 notation is a fundamental tool for this, helping to dissect a company's performance and stability over time.

The most immediate use of T-1 is to spot short-term trends. By comparing a key metric at time T with its value at T-1, you get an instant read on its direction.

• Sales Growth: Is the company's Revenue this quarter (T) higher than last quarter's (T-1)? Consistent growth here is a sign of a healthy, expanding business.
• Profitability: How does this year's Earnings Per Share (EPS) compare to last year's (T-1)? A positive trend suggests the company is becoming more efficient or its products are gaining traction.
• Cash Generation: Is the Free Cash Flow (FCF) today stronger than it was in the prior period? This is crucial, as cash is the lifeblood of any enterprise.

A single T-1 comparison provides a clue, but a series of them (T vs. T-1, T-1 vs. T-2, etc.) reveals a pattern, helping you distinguish a one-time fluke from a genuine business trend.

T-1 is essential for calculating growth rates, a cornerstone of valuation. The formula is straightforward: Growth Rate (%) = ((Value at T / Value at T-1) - 1) x 100 For example, if a company reports an EPS of $2.50 this year (T) and its EPS was $2.00 last year (T-1), the annual growth rate is: (($2.50 / $2.00) - 1) x 100 = 25% This simple calculation is the building block for forecasting a company's future earnings and, ultimately, estimating its intrinsic value.

While T-1 is a concept for analyzing the past, the 'T' notation is also critical for understanding the mechanics of buying and selling shares.

When you buy or sell a stock, the day you make the trade is called the transaction date, or 'T'. However, the ownership of the stock and the cash don't legally change hands until the Settlement Date. This is expressed as 'T+' a certain number of days.

• In the United States, the settlement cycle for most securities is T+1, meaning the transaction settles one business day after the trade.
• In Europe and many other markets, the standard is often T+2 (two business days).

This is important for investors to know. For example, to receive a Dividend, you must own the stock before the ex-dividend date, and the timing is tied to this settlement cycle. It also affects when you will receive cash in your account after a sale.

While useful, T-1 is just a single data point in a long timeline. A great investor like Warren Buffett wouldn't make a decision based on a single quarter's or year's performance. A business might have a fantastic T-1 comparison because of a one-off asset sale, not because its underlying operations improved. Always zoom out. Look at performance over the last five or ten years (T-5, T-10) to understand the bigger picture. Use T-1 as a starting point for asking deeper questions: Why did sales grow? Was it sustainable? Does it enhance the company's Competitive Moat? T-1 tells you what happened, but a true value investor works to understand why.