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The term "trailing 12 months" (TTM) refers to the performance data for a company's past 12 straight months that is used to report financial figures. The 12-month study period may or may not correspond to the end of a fiscal year. For a number of metrics, such as earnings, EPS, P/E, and yield, TTM figures are generated.
TTM numbers are a useful tool for annualized analysis of the most current financial data. Annualized data is crucial because it lessens the impact of non-recurring abnormalities in financial results, such as transient changes in demand, expenses, or cash flow, and helps balance the effects of seasonality.
Analysts can assess the most recent monthly or quarterly data by using TTM rather to older data that includes entire fiscal or calendar year information. TTM charts are more helpful for forecasting and less useful for seeing short-term changes.
Financial statements of a corporation can be systematically assessed using trailing 12-month figures, removing the artificiality of the fiscal year-end. TTM enables an equivalent comparison of a company's performance trajectory, eliminating any irregularities.
For instance, you can use two organizations' TTM revenue data rather than yearly sales figures to compare the revenue growth of two businesses with various fiscal year ends. By doing so, you can avoid comparing like with like and have a more true idea of how they compare.
Financial ratios can be calculated using TTM data as well. The price/earnings ratio, or P/E (TTM), is computed by dividing the stock price at the time of calculation by the company's trailing 12-month earnings per share (EPS). The price that investors are prepared to pay for every dollar of earnings can be determined by this ratio.
To calculate TTM figures from current and prior financial statements, you need to add up the relevant data from the last four quarters or subtract out any overlapping periods. For instance, to get the TTM revenue for the third quarter of 2023, you must add up the revenue from the fourth quarter of 2022, the first quarter of 2023, the second quarter of 2023, and the third quarter of 2023.
