TTM: meaning, where to find the TTM measures and how to calculate it

What does TTM mean?

TTM is a method of calculating a company's financial indicators over the last 12 months. The concept covers a financial year, not a calendar one. For example, if you start analysing the company's activity in September 2024, TTM will help you assess the results from September 2023 to September 2024.

To analyse the company's financial state, several types of data are used:

• Revenue. It is the company's total income from selling goods or services over the past 12 months. This indicator allows us to evaluate how successfully the business attracts new customers and increases sales.
• Net profit. The company's income after deducting taxes and other expenses. Net profit shows whether the business can potentially pay dividends to shareholders.
• EPS (Earnings Per Share). The total net profit divided by the total number of active shares. By checking EPS, investors evaluate the profitability of one share, compare it with similar offers from other companies, and make the best choice.
• EBITDA. The company's earnings before interest, taxes, depreciation, and amortisation. It reflects the business's operational efficiency and financial condition without the influence of external factors.
• P/E (Price-to-Earnings). The share's market price ratio to earnings per share (EPS). It tells you how much investors are willing to pay for each dollar of earnings. A high P/E ratio might suggest that investors expect future growth, while a low P/E might suggest the stock is undervalued or the company has lower growth prospects.
• P/S (Price-to-Sales). The market capitalisation ratio (the value of all shares) to the company's total revenue. A low P/S multiplier usually indicates the business has good growth potential. A high P/S multiplier, in turn, shows that the company's shares are overvalued.
• FCF (Free Cash Flow). All financial resources that remain after deducting capital expenditures. The larger the remaining balance, the more opportunities the company has to finance its operations (pay dividends, buy shares, etc.).

Different from quarterly and annual reports, which may become outdated over time, the Trailing Twelve Months method always reflects the current state of business. Moreover, the company's TTM smooths out seasonal fluctuations and distortions related to time factors.

Why is TTM essential in stock trading?

TTM provides up-to-date, stable, and multifaceted information about companies' financial condition. The tool is helpful for traders and investors due to the following features:

• Relevance of data. TTM is based on data from the past 12 months and includes recently published results and up-to-date changes in financial conditions.
• Useful metrics. Such financial metrics as EBITDA, P/E, and P/S help investors more accurately assess the company’s recent performance.
• Comparative analysis. Traders can use a 12-month period to evaluate and compare the performance of different companies in the same industry.
• Identification of the company's trends and dynamics. For example, if the analysis shows stable revenue or profit growth over several years, this may indicate that the business is trustworthy.
• Flexible analysis. With the TTM method, the state of the business is assessed through various aspects including profitability, growth, and efficiency.
• Fast adaptation to current market conditions. Traders monitor the business's resilience to economic changes during the financial year.

TTM analysis helps traders identify reasonable entry and exit points by analysing a company’s recent financial performance. While it provides valuable insights, traders need to also consider other tools, such as real-time data and market trends, to fully adapt to changing conditions. TTM can support better decision-making, but investment risks remain, and success in the market also depends on broader factors.

Where to find TTM measures

TTM measures represent the business's financial performance over the past 12 months. The most important TTM measures are Revenue, Net Profit, EBITDA, EPS, P/S, P/E, and FCF. You can find actual Trailing Twelve Months measures of certain enterprises offline and online. Where to check them:

• Company's financial records. Every enterprise publishes reports on its profits and losses every quarter and year. These reports contain all the necessary details for calculating TTM.
• Financial news sites. Popular platforms such as Google Finance, Yahoo Finance, Bloomberg, MarketWatch, and others usually have separate sections for publishing current financial data of international companies.
• Brokers. Many investment platforms also give free access to financial information.
• Analytical platforms. Resources like Morningstar, Zacks, or FactSet release in-depth research of the business's current state.
• Open databases. You'll find professional databases on the web, such as Bloomberg Terminal or Thomson Reuters.

How to calculate TTM

To calculate TTM, you need to consider the following data:

• Latest fiscal year data. It is the data on a specific financial indicator (for example, revenue or net profit) for the past 12 months.
• Current YTD (year-to-date) data. All the financial details from the beginning of the current fiscal year to the present day.
• Prior YTD (year-to-date) data. All the financial details for the corresponding period of the previous financial year.

Get a clear picture of the company's revenue over the past year by following these steps:

1. Prepare the data. Compile 10-K (annual) and 10-Q (quarterly) reports.
2. Add up the financial results. Put the results from the beginning of the current fiscal year (current YTD) and the collected data for the previous year (fiscal year data) together.
3. Subtract the results from prior YTD data. Subtract the data received from the beginning of the current financial year from the results of the previous financial year.

Formula

The following formula makes the calculations:

Example

Let’s imagine a company whose annual revenue (data for the latest fiscal year) was $261,000. The company's revenue from the beginning of the year to the present day (current YTD data) is given in the following table:

The company's revenue for the previous year (prior YTD data) is shown below:

Now, we apply the TTM formula:

TTM = financial data for the latest fiscal year + current YTD data – prior YTD data

TTM = $261,000 + $96,677 – $86,590 = $271,087

Thus, TTM is $271,087.

Final thoughts

• Before you invest in stocks, ensure the company you plan to invest in is reliable and financially sustainable. At this point, the Trailing Twelve Months analysis is your number one tool.
• Calculating the company's TTM can help you assess the business and its potential, identify past trends in revenue growth or decline, and choose the most promising stocks for investing.
• To calculate this index, you must take the business's most recent annual report, add all the available YTD data from the latest quarterly report, and subtract last year's YTD data.