What isLTM (Last Twelve Months)?

What isLTM (Last Twelve Months)?

Last twelve months (LTM) refers to the timeframe of the immediately preceding 12 months. It is also commonly designated as trailing twelve months (TTM). LTM is often used in reference to a financial metric used to evaluate a company’s performance, such as revenues or debt to equity (D/E).

Although a 12-month period is a relatively short time span for examining company performance, it is considered useful because it indicates a company’s most recent performance, and is indicative of the company’s current state. The terms “last twelve months” or “trailing twelve months” frequently appear in a company’s earnings reports or other financial statements.

introduction of Last Twelve Months (LTM)

While in some respects, 12 months of data is less than adequate for investment evaluations, it is a long enough span of time to level out annual seasonal factors, possible short-term price fluctuations, and some market swings. Last twelve month figures provide updated metrics from the typical annual and quarterly figures reported by company management.

In reviewing figures shown as last twelve months or trailing twelve months, investors should not assume the figures necessarily coincide with a company’s most recent fiscal year.

In company financial statements, which are typically filed at the company’s fiscal year-end, the last twelve month figures refer to the 12-month period ending on the last date of the month the financial statement is dated, such as June 30 or December 31. For example, in a financial statement dated March 2015, last twelve month figures cover the period of time from April 1, 2014, through March 31, 2015.

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Last twelve months Formula

The following steps are used to calculate the LTM financials of a company:

  1. Find the Last Annual Filing Financial Data
  2. Add the Most Recent Year-to-Date (YTD) Data
  3. Subtract the Prior Year YTD Data Corresponding to the Prior Step

LTM Formula

Last Twelve Months (LTM) = Last Fiscal Year Financial Data + Recent Year-to-Date Data – Prior YTD Data

The process of adding the period beyond the fiscal year ending date (and subtracting the matching period) is called the “stub period” adjustment.

If the company is publicly traded, the latest annual filing data can be found in its 10-K filings, whereas the most recent YTD and corresponding YTD financial metrics to deduct can be found in the 10-Q filings.

Let’s say that a company has reported $10 billion in revenue in the fiscal year 2021. But in Q-1 of 2022, it reported quarterly revenue of $4 billion.

The subsequent step is to source the corresponding quarterly revenue – i.e. revenue from Q-1 of 2020 – which we’ll assume was $2 billion.

Here in our illustrative example, the LTM revenue of the company is $12 billion.

  • LTM Revenue = $10 billion + $4 billion – $2 billion
  • LTM Revenue = $12 billion

The $12 billion in revenue is the amount of revenue generated in the preceding twelve months.

Why do Analysts and Investors use LTM figures?

  • LTM is considered useful in assessing the most recent business performance, which is indicative of the company’s current trend;
  • Its figures are more current than the fiscal or annual financial statements, which helps to avoid potentially misleading short-term measurements;
  • It is useful for comparing the relative performance of similar companies within an industry or sector;
  • LTM figures provide a more accurate value of a business in the event of an acquisition; and
  • It gives a relevant measurement of the price-to-earnings ratio.
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The LTM time frame is sufficient to provide analysts and investors with financial metrics that are not inappropriately influenced or distorted by factors such as seasonality or brief market or economic turndowns. Some of the financial ratios that are most frequently calculated on an LTM basis are earnings per share (EPS) and dividend yield.

Using the Last Twelve Months Metrics

In addition to being used to gauge the recent trend of a given company’s performance, the last twelve month financial metrics are also frequently used to compare the relative performance of similar companies within an industry or sector. Financial metrics commonly considered by looking at last twelve month figures include a company’s price-earnings (P/E) ratio and earnings per share (EPS).

In reviewing stocks, mutual funds and exchange-traded funds (ETFs), the dividend yield figure for the last twelve months is often compared with the SEC yield figure, which reflects only the yield of the most recently paid dividend. Another instance where the last twelve months’ figures are useful is when a company is being considered for acquisition. To arrive at a more accurate current value of a company, last twelve months’ figures are often preferable to the most recent fiscal year figures.