What Is Last 12 Months (LTM)?
When you're looking at a company's financial performance and its potential for growth, the last 12 months (LTM) is the timeframe I focus on as an analyst. It's what we use to evaluate key figures like revenues and debt-to-equity (D/E) ratios in their most current context.
By examining the immediate past 12 months, you avoid the noise from old data while including all seasonal ups and downs in the business. This gives you a clear picture of the company's recent performance and its current state.
You might also hear LTM referred to as trailing twelve months (TTM). For instance, on a stock quote page, you'll see the P/E ratio and earnings per share (EPS) listed as TTM, meaning for the trailing 12 months.
Understanding Last 12 Months (LTM)
While 12 months might seem short for a full investment evaluation, it's sufficient to balance out annual seasonal factors, temporary price changes, and some market volatility. These LTM figures give you updated metrics beyond the standard annual or quarterly reports from company management.
Keep in mind that when you see last 12 months or trailing 12 months in financials, don't assume it matches the company's most recent fiscal year. In statements filed at fiscal year-end, LTM covers the 12 months ending on the statement's date, like June 30 or December 31.
For example, if a financial statement is dated March 2015, the LTM figures would span from April 1, 2014, through March 31, 2015.
Using Last 12 Months Metrics
Beyond just tracking a single company's recent trends, LTM financial metrics help you compare similar companies in the same industry or sector.
Common metrics we look at through an LTM lens include the price-earnings (P/E) ratio and earnings per share (EPS).
When reviewing stocks, mutual funds, or ETFs, you'll often compare the dividend yield over the last 12 months to the SEC yield, which only shows the most recent dividend payout.
LTM figures are especially handy when a company is up for acquisition; they provide a more accurate current valuation than just the latest fiscal year numbers.
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