TTM Calculator – Trailing Twelve Months
The amazing trailing twelve months TTM calculator helps you determine any last twelve-month financial value. In this article, we will cover what TTM means in text, how to interpret revenue TTM or EPS TTM, among others, and include a real-life TTM stock valuation as an example.
What is the trailing twelve months (TTM) for stock investing?
Public companies usually present results four times a year: 1st quarter, 2nd quarter, 3rd quarter, 4th quarter. The last quarter report is followed by a full-year report called the "annual report" which includes the results of the whole fiscal year.
Once you have the yearly values, it is easy to compare year-over-year financial metrics, but what to do if you are in the middle of the year with only the 2nd quarter report available?
Then you use the last twelve months' information. The trailing-twelve-month value (TTM) represents the previous four quarters counting back from the last report you have. For example, if the 2nd quarter 2021 report was just released, TTM values will include such information from the 1st quarter 2021, the 4th quarter 2020, and the 3rd quarter 2020.
The main reason why we need to understand this topic relies upon the necessity to track our investments through the year and decide if you want to buy the stock, do dollar cost average for reducing your initial cost basis, or sell your position because financial fundamentals do not hold anymore.
Thus, the TTM calculator we created for you has six modes of operation: the very first one is for any TTM value, and the other five are for the most famous TTM metrics:
- TTM EPS;
- TTM revenue;
- TTM PE ratio;
- TTM yield; and
- Enterprise value to TTM EBITDA multiple.
Please keep reading to check how to use them all.
How to use our trailing twelve months (TTM) calculator?
First, we will review the formula. Let's use the revenue TTM equation for the explanation.
Here, Revt represents the last quarterly available value for the revenues of the company. Revt-1 represents one quarterly period behind the last reported. Revt-2 and Revt-3 represents two and thee quarterly periods behind the last reported respectively. Consequently, revenue TTM includes the last four available reported quarterly revenues.
Now that we understand the TTM meaning in text and using math, we will check how to use it in our TTM calculator:
- Select the TTM mode. Let's say you choose Enterprise value to EBITDA TTM from the five available options. For more information about EBITDA, please check the EBITDA calculator
- Add the current enterprise value.
- Add the last four quarterly EBITDA recorded values.
- Enjoy the result of our TTM calculator: EV to TTM EBITDA multiple.
Finally, you can use the general TTM mode to calculate any financial cumulative financial metric such as EBITDA margin.
What are the most common metrics expressed in TTM in finance?
The importance of the TTM in finance relies on the fact that the companies report results over the year, and such results impact the stock price. For example, let's suppose EPS growth decreases. Then investors could start considering that the current price to earnings ratio is too high, and the stock price might drastically drop.
If you are not aware of trailing twelve-month values when new reports come, you could be left holding a stock that nobody wants and get a loss. Consequently, we are going to cover the most famous TTM metrics:
TTM Revenue: Consists of the sum of the revenue reported on the last four quarters. Useful to keep an eye on, so you can constantly update your sales-related valuation metric in the price to sales ratio calculator.
TTM EPS: Includes the last four quarter reported earnings per share. Once having the TTM EPS, you will be able to compare year over year to analyze its growth.
TTM PE: Includes the last four quarter reported earnings per share but compares it to the most recent price per share. Remember:
Then, you know how much the stock costs for 1 dollar generated of EPS in the last twelve months.
EV / EBITDA TTM: It considers the current enterprise value and divides it by the last four quarterly reported EBITDA. It indicates how many dollars a parent company would pay for acquiring the business related to one dollar generated of EBITDA.
TTM yield: In this category, we find many ratios that indicate a return to the stockholder over the price they pay. For example, the free cash flow yield and the dividend yield.
As a side note about dividends, use the dividend yield calculator to check how much you are going to be paid depending on the amount of shares you have.
What does TTM mean in finance?
TTM stands for trailing twelve months. It is a method for expressing the last 12 months of available information of stock, regardless of the time you are. For example, imagine it is November, and you want to compare two stocks on a yearly basis but do not want to wait until the year-end fiscal report. Then you calculate the TTM value with our TTM calculator and voilà!
How do I calculate the TTM PE ratio?
- You get the income statement of the last four reported quarters.
- Pick the earnings per share from each report and sum them all. Then you will have EPS TTM.
- Get the most recent price of your stock.
- Divide the price by the EPS TTM. Now you have the TTM PE.
What is a bad EV to TTM EBITDA?
It mainly depends on the industry to which the company belongs. If the company trades excessively over the sector's average, then we have a terrible EV to TTM EBITDA. For example, the cybersecurity industry has an EV to TTM EBITDA of 28.5. But the leader of that industry, Fortinet, trades at 82.7 times EV to TTM EBITDA, making it a costly stock and, consequently, risky investment.
How to use TTM for future valuation?
The TTM price to earnings ratio (PE) is the result of dividing the current stock price by the trailing twelve-month earnings per share.
Imagine in 2021 it is 40 (expensive to many investors). Now assume the company is growing earnings at 50% CAGR. That will result in a future 2022 PE ratio equal to 26.6 and a 2023 PE ratio equal to 17.7, which now is considered a better multiple and a less risky investment.