ttm

ttm (also known as Trailing Twelve Months) is a timeframe used for reporting a company's financial performance. Instead of looking at a traditional fiscal year (like January 1st to December 31st), TTM represents the data from the most recent 12-month period, regardless of when that period started or ended. Think of it as a rolling, up-to-date annual report. For example, if a company has just released its results for the first quarter of 2024, its TTM figures would cover the period from April 1, 2023, to March 31, 2024. This method is incredibly useful because it provides a more current snapshot of a company's health than an annual report, which might be several months out of date by the time it's published. It also smooths out the seasonal volatility that can make a single quarter's results misleading, giving investors a more stable and relevant picture of recent performance.

Imagine trying to drive a car by only looking in the rearview mirror once a year. That’s a bit like relying solely on annual reports. TTM data acts as a more frequently updated mirror, giving you a clearer view of the road you've just traveled.

Companies typically report their full results once a year and provide updates every three months through quarterly reports (or SEC filings like the 10-K and 10-Q in the U.S.). The problem is the lag. An annual report for a year ending in December might not be released until the following March. By then, a full quarter of the new year has already passed! A single quarter can also be misleading. A retailer might look like a superstar in the fourth quarter due to holiday sales, but what about the rest of the year? TTM solves both problems by being both current and comprehensive.

Calculating TTM is straightforward. You simply add up the results from the last four consecutive quarters. For example, to find the TTM revenue for a company that just reported its first-quarter (Q1) 2024 results, you would do the following:

• Add: Q2 2023 Revenue
• Add: Q3 2023 Revenue
• Add: Q4 2023 Revenue
• Add: Q1 2024 Revenue
• Result: TTM Revenue

Most financial data providers do this calculation for you, so you rarely have to do the math yourself.

For a value investor, who builds decisions on solid facts rather than speculative forecasts, TTM is an indispensable tool. It grounds analysis in actual, recent performance.

Many of the most important valuation metrics rely on a 12-month period for their “per-share” calculations. Using TTM figures makes these ratios more relevant.

• P/E Ratio (Price-to-Earnings Ratio): When you see a company’s P/E ratio, it's often a Trailing P/E. This means the price is being divided by the TTM earnings per share (EPS). This is powerful because it's based on actual profit the company has already made, not the speculative, often overly optimistic, profit of a Forward P/E which uses estimated future earnings.
• EV/EBITDA: This popular metric, which compares a company's enterprise value to its earnings before interest, taxes, depreciation, and amortization, is most reliable when calculated using TTM EBITDA.
• Dividend Yield: To get the current yield, you divide the TTM dividend per share by the current stock price. This tells you the actual return you would have received in dividends over the past year.

Because TTM data is a rolling 12-month window, it can highlight trends sooner than an annual report. If a company is starting to turn its business around, you might see its TTM revenue and profits begin to slowly tick upward quarter after quarter. This can be an early signal for a value investor that a company’s fortunes are changing for the better, potentially before the rest of the market catches on.

While powerful, TTM isn't a perfect crystal ball. It’s important to be aware of its limitations.

• It's Backward-Looking: TTM tells you where a company has been, not where it's going. It's a snapshot of the recent past, and the future could be very different.
• One-Time Events Can Distort It: If one of the quarters within the TTM period included a large, one-off event (like the sale of a factory or a major lawsuit settlement), it can skew the numbers, making them look unusually good or bad. Always dig into the quarterly reports to see if the TTM figures are being affected by non-recurring items.
• Less Useful for Rapid Change: For a company undergoing a massive transformation or operating in a highly cyclical industry, the past 12 months may not be a good indicator of future performance at all. In these cases, looking at individual quarters and management's guidance is even more critical.