TTM: What Trailing 12-Month Returns Mean For You Via ForbesAdvisor
TTM can be applied to a wide range of financial data. Let’s take a look at how TTM is applied to revenue, yield and P/E ratios.A company’s total revenues from the last 12-month period. For a bank, this would be interest income and other fees, while for a manufacturing or retail firm it could be net sales. A TTM revenue measure provides a more accurate picture of recent performance than the firm’s last annual or quarterly revenue report, which could be months old already.
For managers, TTM metrics provide an immediate view of a company’s financial health. Consistently examining the previous 12 months averages out ingredients such as seasonality, temporary volatility or one-time charges, offering a picture more representative of a company’s financial state at a given moment in time.Public companies release financial reports on a quarterly basis in the form of securities filings.
“There’s no better gauge of a company’s prospects than how it’s performed over the last 12 months. TTM has stood the test of time as a powerful indicator of performance and potential,” said Larry Luxenberg,TTM is useful as a clear standard, since sometimes firms will provide monthly statements detailing sales volumes or performance indicators, whereas Securities and Exchange Commission filings present quarterly or YTD financials.
Here’s an example. It’s Q2 of 2021. Let’s say that ManufactCorp, a company whose business you’re analyzing, just reported revenues of $10 bn YTD, while their revenues for the previous year were $33 bn and last year’s YTD figure was $6 bn. You add 10 and 33 and subtract 6, getting $37 bn as the TTM revenue figure.TTM is a popular metric not only because it covers a useful time frame, but because it’s simply a prerequisite.
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