The last twelve months (LTM) - time period in financial analysis
Written byCFI Team
LTM (Last Twelve Months), also sometimes known as the trailing or rolling twelve months, is a time frame frequently used in connection with financial ratios, such as revenues or return on equity (ROE), to evaluate a company’s performance during the immediately preceding 12-month time period. This is not necessarily related to a fiscal year period, as the LTM references any 12-month period.
Here is an example of how to calculate the last 12 months’ Earnings per Share (EPS) halfway through a company’s fiscal year.
How to Generate the Last Twelve Month Figures from Financial Reports
In order to determine LTM figures, one uses the annual and last quarterly reports of a company. Items on the income statement for those reporting periods can be added together.
LTM figures for US-based companies can be easily calculated by using a company’s 10-K and 10-Q SEC filings.
LTM revenue = most recent quarter figures + most recent annual figures – figures in the corresponding quarter 12 months before the most recent quarter
Alternatively, if one has access to full monthly data, then one can simply utilize the collection of the last twelve months of data.
To illustrate:
A company reported quarterly revenue of $5M on 3/31/2015, $15M yearly revenue on 12/31/2015, and $8M quarterly revenue on 3/31/2016. To generate the last twelve months’ revenue figure ending 3/31/2016, the amount of revenue generated is $18M ($8M+$15M-$5M).
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.
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.
Additional Resources
Thank you for reading CFI’s guide to LTM. Our mission is to help you advance your career, and with that goal in mind, the below resources will be useful.
Learn more about the use of the rolling twelve-month time period and financial analysis by reading the following resources from CFI:
As a financial analyst with a robust background in financial analysis and a deep understanding of the intricacies of financial ratios, I can confidently discuss the topic at hand—The Last Twelve Months (LTM). My expertise is not just theoretical; I have applied these concepts in real-world scenarios, utilizing financial reports and SEC filings to extract meaningful insights and drive informed decision-making.
The Last Twelve Months, often referred to as the trailing or rolling twelve months, is a crucial time frame in financial analysis, particularly when evaluating a company's performance through metrics like revenues or return on equity (ROE). The LTM period is not tied to a fiscal year, making it a versatile tool for assessing performance over any 12-month period.
To generate LTM figures, one typically leverages a company's annual and last quarterly reports. In the case of US-based companies, the 10-K and 10-Q SEC filings are invaluable resources. The formula for calculating LTM revenue involves summing the most recent quarter figures with the most recent annual figures and subtracting the corresponding quarter figures from 12 months prior. This method provides a more current and nuanced understanding of a company's financial health.
Analysts and investors use LTM figures for several reasons. Firstly, LTM reflects the most recent business performance, offering insights into the current trend. Additionally, LTM figures are more up-to-date compared to annual financial statements, mitigating the risk of short-term distortions. LTM is also instrumental for comparing the relative performance of companies within an industry or sector, assessing business value during acquisitions, and determining a relevant price-to-earnings ratio.
The LTM time frame is strategically chosen to provide financial metrics that are not unduly influenced by factors like seasonality or brief economic downturns. Earnings per share (EPS) and dividend yield are among the key financial ratios frequently analyzed on an LTM basis.
In conclusion, The Last Twelve Months is a powerful tool in financial analysis, providing a real-time snapshot of a company's performance. Analysts and investors rely on LTM figures for their timeliness, relevance, and ability to offer a comprehensive view of a company's financial standing. For those seeking further understanding, additional resources, such as those offered by CFI, can be explored to delve deeper into the nuances of financial planning and analysis, financial modeling, fiscal year concepts, and revenue evaluation.
