What is Last Twelve Months (LTM)?
Last Twelve Months (LTM) refers to the period comprising the immediately preceding 12 months. It is also known as Trailing Twelve Months (TTM). LTM is frequently referenced when evaluating a company’s performance metrics, such as revenue or debt to equity (D/E) ratio. Though a 12-month span is relatively short, it provides a current snapshot of a company’s performance and indicates its current financial state. The terms “Last Twelve Months” or “Trailing Twelve Months” often appear in corporate earnings reports and other financial documents.
Why last Twelve Months (LTM) Is Valuable
While 12 months might seem short for in-depth investment assessments, it’s sufficiently long to mitigate seasonal variations, short-term price volatility, and market fluctuations. LTM data updates typical annual and quarterly figures, offering a refreshed and immediate perspective. When you see LTM figures in corporate financial statements, note that they reflect the 12-month period concluding at the month-end date of the document, such as June 30 or December 31. For instance, a financial statement dated March 2015, representing LTM figures, would cover April 1, 2014, through March 31, 2015.
LTM metrics are not just invaluable for monitoring recent trends in company performance; they are also crucial for comparing similar companies within an industry or sector. Metrics such as the price-earnings (P/E) ratio and earnings per share (EPS) for the last twelve months provide insights into relative performance.
In analyzing stocks, mutual funds, and ETFs, investors often compare the dividend yield for the last twelve months with the SEC yield, which accounts only for the most recently paid dividend. This comparison helps in gathering a realistic outlook of dividend returns. Additionally, LTM figures provide a more accurate current value crucial when considering a company for acquisition, making them preferable over the most recent fiscal year data.
Related Terms: Trailing Twelve Months, Annual Report, Quarterly Earnings, Fiscal Year, Price-Earnings Ratio, Earnings Per Share.
References
Get ready to put your knowledge to the test with this intriguing quiz!
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## What does LTM stand for in financial terminology?
- [ ] Last Three Months
- [x] Last Twelve Months
- [ ] Largest Trading Margin
- [ ] Lacking Total Market
## Which of the following best describes LTM?
- [ ] A forecast of the next twelve months
- [x] A measure of financial performance over the most recent 12-month period
- [ ] An average of performance over five years
- [ ] Data adjusted for seasonal variations
## Why is LTM often used in financial analysis?
- [ ] To predict future earnings
- [ ] To adjust annual reports
- [ ] To compile quarterly data
- [x] To provide a more accurate, up-to-date performance measurement
## How is LTM data typically derived?
- [x] By summing up financial data from the most recent four quarters
- [ ] By averaging the data from the last 12 years
- [ ] By extrapolating data from the last three months
- [ ] By solely using annual reports
## In which industry is LTM particularly useful?
- [ ] Only in the technology sector
- [x] Across various industries including finance, retail, and manufacturing
- [ ] Exclusively in healthcare
- [ ] Only in small businesses
## Which of the following metrics is frequently analyzed on an LTM basis?
- [ ] Present value
- [ ] Market capitalization
- [x] Earnings before interest, taxes, depreciation, and amortization (EBITDA)
- [ ] Future sales projections
## LTM can also be referred to as:
- [x] Trailing Twelve Months (TTM)
- [ ] Next Twelve Months (NTM)
- [ ] Average Twelve Months (ATM)
- [ ] None of the above
## When comparing companies, why might an analyst use LTM figures?
- [ ] To evaluate long-term trends
- [ ] To disregard recent performance
- [x] To ensure a consistent time frame for comparison
- [ ] To calculate annualized returns
## Which financial statement does NOT typically provide LTM data directly?
- [ ] Quarterly report
- [ ] Annual report
- [ ] Income statement
- [x] Cash flow statement
## What is a key advantage of using LTM data?
- [ ] It avoids any potential seasonality effects
- [ ] It archives historical financial performance over several years
- [x] It reflects the most current financial standing
- [ ] It relies on predicted future values
