t_1 [CapiPedia]

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====== 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.
===== Why T-1 Matters to Value Investors =====
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.
==== Spotting Trends and Momentum ====
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.
==== Calculating Growth Rates ====
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.
===== T-1 in Practice: Beyond the Basics =====
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.
==== The "T+" Settlement Cycle ====
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.
==== A Word of Caution ====
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//.