Investors frequently assess a company’s financial performance by examining sales, costs, and net income over the previous 12 months, or the trailing twelve months (TTM).
TTM, which stands for “trailing twelve months,” refers to a company’s performance over the previous 12 months. Anyone that uses TTM frequently considers the amount of income the company has brought in over the last 12 months at any given moment. However, TTM measurements also take into account costs, net income, and other figures for the same time frame. A business owner or investor may determine if a company is moving up or down based on the most recent performance, accounting for any seasonality of the company, by taking all of these criteria into consideration.
The term “trailing price-to-earnings (P/E) ratio” is frequently used to describe this. It may be computed by taking the current stock price and dividing it by the company’s four-quarter average profits per share. This aids in demonstrating to investors how pricey a company is in comparison to its historical profit growth.
TTM yield is the portion of income that a certain investment has paid out to investors over the course of the past 12 months. By calculating the weighted average of the yields in the asset portfolio and comparing the results to those for each month or quarter of the prior year, one may determine this.
Where TTM Is Found in Financial Analysis
TTM is a term used in finance to describe gauging a company’s financial performance over the previous 12 months. This is often done to either assist management in making better decisions, to get finance, or for investors to assess and decide whether it is worthy of their investment. You may determine the company’s performance and if it is a prudent investment by looking at the sales, costs, and net income over the last 12 months.
Benefits of Using TTM
When analyzing a metric’s trailing twelve-month value, one may assess a company’s success. The following advantages can result from using the TTM instead of other time periods:
- Helps build a baseline: You can use this as a starting point for your performance evaluations in the future.
- Eliminates seasonality: Understanding the cyclical ups and downs of a firm over the course of a whole year is helpful.
- Tracking of leading indicators: TTM analysis keeps track of some of the most crucial information that every investor or organization should be aware of.
- Up-to-date information: This activity must yield current financial data that gives the greatest overall view of the performance of the organization.
TTM vs. YTD
- TTM at any time takes a picture of the last 12 months. A May 2022 analysis, for instance, would examine performance going all the way back to June 2021 and forward.
- A YTD analysis solely considers results for the most recent calendar year. The data will only cover January and February of that year if the study is done as of March 1.
- A TTM analysis gives a better overall financial picture since it takes into account the performance over more time, in most cases.
In general, using the TTM to evaluate a firm may aid companies in understanding their financial situation. Additionally, it may aid investors in fully comprehending how a possible investment behaves during every season of the year.