Jan 28, 2022

TTM Stock Meaning: What Does it Mean for Stocks? Wisesheets Blog

The methodology for calculating TTM data may differ from one financial statement to the next. The price-to-earnings ratio, also known as P/E (TTM), is computed by dividing the current stock price by the company’s trailing 12-month earnings per share (EPS). Investors who are looking for steady income instead of growth like to compare the average returns of stock or bond mutual funds or exchange-traded funds (ETFs) over the trailing 12 months. There is no standardized formula for calculating this, so it’s important for investors to be aware of how each TTM yield is calculated to ensure they are comparing apples with apples. Conceptually, the trailing twelve months (TTM) is a measure of a company’s financial performance in the most recent 12-month period.

Revenue And TTM

A better way remains using the ttm meaning in share market TTM numbers, which you can calculate using a mix of annual and quarterly reports. And always ensure we use twelve-month numbers or four quarters’ worth of financials. As investors, accessing the latest and greatest data helps us make better decisions. And the use of financial filings such as the income statement should be our first resource. Sometimes, waiting for the next filing is not a choice, and analyzing a company mid-year means we need to either update info or guess. The trailing-twelve-month term used in finance describes the past twelve months of its financial performance.

Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. The last full fiscal year’s number may already be outdated, especially late in the year.

Trailing 12 months calculation in Excel

1. Analysts and investors utilize TTM to analyze a vast array of financial data, including balance sheet statistics, income statements, and cash flows.
2. TTM includes the most recent 12-month period, updated to the most recent time frame to reflect how much revenue a company has made.
3. One way of computing data from the last twelve months is to sum the three months resulting from dividing the fiscal year by the last four quarters.
4. For instance, if a company’s EPS has risen from $0.50 (during the TTM period from July 2019 to June 2020) to $0.75 (in the TTM period from July 2021 to June 2022), it signals a robust 50% growth in a year.
5. When calculating TTM, you account for the stock price change caused by the release of the company’s past four quarterly statements.

The bonus of using TTM numbers is that analysts can see how the company performs annually without waiting for the annual report filing. For example, in a financial statement dated March 2020, the last twelve months’ numbers cover the period from April 1, 2019, through March 31, 2020. Twelve months is not a long time to evaluate a company in the grand scheme of things. A better time frame is five to ten years, but in the short-termism of Wall Street, LTM or TTM is quite common.

Why is the TTM often preferred over the previous fiscal year reports?

Trailing 12 months (TTM) is used to describe the past 12 consecutive months of a company’s performance data when reporting financial figures. Using these figures provides a picture of a business’s current financial performance rather than its annual filings and reports, which may contain outdated information. TTM figures are produced for various metrics, including earnings, earnings per share (EPS), price-to-earnings (P/E) ratio, and yield. It refers to the past 12 consecutive months of a company’s financial performance.

How is TTM Calculated?

Using the TTM data, which can be calculated by combining yearly and quarterly reports, is preferable. And ensuring that we always use twelve-month figures or four-quarter financial financials. The trailing twelve-month (TTM) yield of a mutual fund or exchange-traded fund (ETF) is the percentage of income paid to investors over the last year. The TTM yield of a fund is calculated by averaging the yields of the portfolio assets. Different from quarterly and annual reports, which may become outdated over time, the Trailing Twelve Months method always reflects the current state of business.

For a real-world example, suppose an equity analyst is tasked with updating a financial model to reflect the TTM income statement data of Alphabet (GOOGL). In practice, the two most common metrics presented on a trailing twelve-month basis are TTM revenue and TTM EBITDA. The performance of company during last 12 months is best indicator of its future prospects. TTM has proven to be reliable predictor of future performance throughout time, according to Lexington Avenue Capital Management principal Larry Luxenberg, CFA, of New York. “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, CFA, principal at New York-based Lexington Avenue Capital Management.