Definition: What does LTM mean?
Last Twelve Months (LTM) is a timeframe used in financial analysis that represents the most recent 12-month period.
Also known as Trailing Twelve Months (TTM) or rolling twelve months, this metric is commonly utilized by investors and analysts to evaluate a company’s financial performance and compare it with competitors or industry benchmarks.
Using LTM in financial analysis considers a company’s revenue, profit, earnings per share (EPS), and other key metrics for a full year instead of focusing on one fiscal quarter (Q1, Q2, Q3, or Q4) or a single fiscal year-end. This helps in getting a more accurate picture of a company’s current financial state, making it easier to spot trends and seasonality patterns. Furthermore, LTM data helps forecast future revenue growth and evaluate a company’s financial health.
Public Companies
To calculate LTM figures, you’ll need the company’s financial reports containing data for the four most recent quarters, found in their 10-K and 10-Q SEC filings. You can then add up the quarterly revenues, profits, EPS, and other financial metrics to arrive at the LTM numbers.
Private Companies
For private companies, such as small businesses, you can apply this same method for financial analysis by looking at the financial statements for the last four quarters.
Some common applications of LTM in financial analysis include valuing acquisitions, assessing dividend yield, evaluating price-to-earnings (P/E) ratios, and comparing net sales or operating income across companies in the same sector. When using LTM for your financial evaluations, you must be aware of factors like non-recurring items, inconsistencies, and GAAP vs. non-GAAP figures.
Origins of Analyzing by Last Twelve Months
The term “Last Twelve Months” (LTM) originates in the finance world. This timeframe is used to evaluate companies’ performance over the most recent 12-month period, rather than just relying on annual reports.
LTM, also sometimes called the trailing or rolling twelve months, has become an essential tool for investors and analysts. They use it to examine financial ratios like revenues, profits, and earnings per share to gauge how a company has performed in the past year.
So, why is LTM so popular? It’s because it offers a more up-to-date snapshot of a company’s financial health. Focusing on the previous year allows you to observe trends and make more informed decisions about the company’s future potential.
In summary, the Last Twelve Months (LTM) is a crucial term in finance, which helps provide an accurate and comprehensive analysis of a company’s ongoing performance. By staying informed on LTM, you can make smarter investment choices based on the latest financial data.
Synonyms/Antonyms
Synonyms for “Last Twelve Months (LTM)” include trailing twelve months (TTM), rolling twelve months, past year, and previous twelve months. These terms are frequently used to describe financial performance over a one-year period.
Antonyms of “Last Twelve Months (LTM)” might include the next twelve months (NTM) or the future twelve months, which refer to anticipated financial performance in the upcoming year.
When analyzing a company’s financial state, investors often look at the LTM to evaluate revenue, earnings per share (EPS), EBIT (earnings before interest and taxes), and EBITDA (earnings before interest, taxes, depreciation, and amortization) among other financial metrics. LTM can play a crucial role in acquisitions, investment evaluations, and comparisons of companies within the same industry or sector.
To calculate LTM, you can use the following formula:
Last Twelve Months (LTM) = Last Fiscal Year Financial Data + Recent Year-to-Date Data – Prior YTD Data
This calculation helps adjust for any inconsistencies due to seasonality, provides a clear picture of a company’s financial health, and facilitates comparison with peers.
While LTM figures can offer valuable insights into a company’s financial performance, remember that historical data doesn’t always indicate future success. Always consider the company’s prospects, industry trends, and relevant forecasts to make informed investment decisions.
How the LTM Are Used in Financial Analysis
LTM, or Last Twelve Months, is a valuable tool in financial analysis, as it provides a comprehensive view of a company’s performance over the most recent 12-month period. This approach helps you gauge financial metrics such as revenue, return on equity (ROE), and other key performance indicators (KPIs).
LTM offers you a more accurate representation of a company’s current standing since it accounts for different seasonal business cycles. For instance, you can better understand the performance of a company that has higher sales during winter and lower sales during summer.
To use LTM, you’ll need to collect financial data for the latest 12-month period, which may include income statements, balance sheets, and cash flow statements. After gathering the data, you can calculate the LTM for key metrics as needed to make informed decisions and assess a company’s financial health.
Here are some simple steps to calculate LTM for a company’s revenue:
- Obtain the quarterly or monthly financial statements for the past 12 months
- Identify the revenue line item in each statement
- Add up the revenue numbers from each statement
Examples of Analyzing a Company’s Performance in the LTM
When it comes to Last Twelve Months (LTM), investors use various financial metrics to assess a company’s performance. Let’s consider a few examples.
One way to calculate LTM is by using Earnings per Share (EPS). For instance, halfway through a fiscal year, you might need the LTM EPS. To obtain this, combine the most recent annual figures from the income statement with the most recent quarter figures.
LTM Revenue is another essential metric. It represents the company’s total revenue in the 12 months leading up to a specific date. To calculate, you’ll need the company’s quarterly reports and then add net sales figures for the latest four quarters.
Additionally, you can use LTM EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to assess profitability. Like LTM Revenue, you’ll need the company’s financial reports, summing up all EBITDA figures for the past 12 months.
Investors often evaluate Price-to-Earnings (P/E) ratios on an LTM basis. To calculate this, take the stock’s current market price and divide it by the LTM EPS – this helps determine the relative value of a company’s stock.
LTM financial metrics like revenue, EPS, and EBITDA help paint a better picture of a company’s financial state, allowing investors and analysts to make informed decisions. When dealing with seasonality, inconsistencies, or cyclical industries, LTM calculations can prove handy in understanding a company’s true performance.
Related Terms
Last Twelve Months (LTM): A commonly used period to evaluate a company’s financial performance, LTM covers the past 12 months, ensuring you get a clear snapshot of a company’s financial state. It is beneficial in analyzing key financial metrics like revenue, profit, earnings per share (EPS), and more.
Trailing Twelve Months (TTM): Similar to LTM, TTM also focuses on the preceding 12 months of a company’s performance. Investors and analysts often use TTM to analyze a company’s growth and profitability and make investment evaluations based on available data.
Financial Metrics: Key performance indicators that help you gauge a company’s financial health, like revenue, net income, EBIT, EBITDA, dividend yield, and more. These metrics are crucial in understanding a company’s financial position and enable sound decision-making regarding investment and acquisition opportunities.
Quarterly Reports & 10K: Companies provide financial reports to disclose their financial state, including their revenue, net income, and other key numbers. Quarterly reports offer insights into a company’s performance every three months, while the 10K is a more comprehensive annual report filed with the SEC.
Price-to-Earnings Ratio (P/E): This is a widely used financial ratio to determine if a stock price aligns with the company’s earnings. A higher P/E can indicate optimistic growth expectations, while a lower P/E might suggest undervaluation.
Seasonality & Cyclical Trends: Some industries tend to experience fluctuations in revenues and earnings due to seasonal or cyclical factors. Accounting for these factors is vital when analyzing LTM and TTM figures to compare and evaluate a company’s performance properly.
Understanding these related terms and concepts will help you evaluate a company’s performance more effectively.