In the world of finance, TTM stands for Trailing Twelve Months based on the article What does TTM Mean.
What is TTM?
Trailing Twelve Months (TTM) is a consolidated report of a company’s performance for the past 12 consecutive months.
How is it derived?
Trailing Twelve Months (TTM) is derived from a company’s interim or quarterly, or annual reports.
What is TTM used for?
Trailing Twelve Months (TTM) is calculated to measure a company’s financial performance, i.e., income and expenses.
Why is TTM extremely useful for investors?
Trailing Twelve Months (TTM) is extremely useful for the investors because it provides the latest annualized numbers and factors out the seasonal volatility of quarterly numbers.
Investors need to remember that Trailing Twelve Months (TTM) may or may not coincide with a fiscal-year ending period.
How can you calculate it?
Suppose Amazon has released the Q2 reports of 2020.
To calculate the Trailing Twelve Months (TTM) for Amazon, you need to have the followings:
- 2019’s Q3 and Q4.
- 2020’s Q1 and Q2.
Formula:
Trailing Twelve Months (TTM)= Q (latest) + Q (1 quarter ago) + Q (2 quarters ago) + Q (3 quarters ago)
In Amazon’s case, it will be:
Q2 (2020) + Q1 (2020) + Q4 (2019) + Q3 (2019)= Trailing Twelve Months (TTM)
Advantage & Disadvantage of Trailing Twelve Months (TTM):
Advantage:
It helps investors and financial institutions scrutinize a company based on the latest 12-months’ financial performance.
Disadvantage:
Businesses that encounter volatile seasons might face a problem in deriving TTM. It is because the values of their financial data can undergo quick change.