Definition of Trailing Twelve Months (T12)
Trailing Twelve Months (T12) is a financial term used to describe a company’s financial performance over the past twelve consecutive months. The T12 period is not necessarily aligned with a fiscal year-end period. T12 figures are calculated for various metrics, including earnings, earnings per share (EPS), price-to-earnings (P/E) ratio, and yield.
Key Facts
- T12 Definition: Trailing Twelve Months (TTM) refers to a company’s financial performance over the past twelve months or four quarters.
- T12 Revenue Calculation: To calculate T12 revenue, you can follow these steps:
a. Compile the company’s Annual Report (10-K) and the latest Quarterly Reports (10-Q).
b. Add the Year-to-Date (YTD) data to the fiscal year data.
c. Subtract the YTD data from the prior year. - T12 Formula: The formula for calculating a financial metric on a trailing twelve-month basis is as follows:
TTM = Latest Fiscal Year Data + YTD Data – Prior YTD Data - Example Calculation: Let’s consider an example where a company’s revenue for each quarter is as follows:
- Q1, 2022 = $20 million
- Q2, 2022 = $25 million
- Q3, 2022 = $40 million
- Q4, 2022 = $60 million
The company’s revenue for the fiscal year 2022 is $145 million. In Q1 of 2023, the company reported $75 million in revenue. To calculate the T12 revenue, you would use the following formula:
TTM Revenue = FY-22 Revenue + Q1-23 Revenue – Q1-22 Revenue
TTM Revenue = $145 million + $75 million – $20 million = $200 million
Understanding Trailing Twelve Months (T12)
Analysts and investors utilize T12 to analyze a wide range of financial data, such as balance sheet figures, income statements, and cash flows. The methodology for calculating T12 data may vary depending on the financial statement. TTM figures are often preferred by investors seeking daily information about stock prices and other current data because they are more current and seasonally adjusted.
Calculating Trailing Twelve Months (T12) Revenue
T12 revenue represents a company’s revenue earned over the past twelve months. It is calculated by adding up the previous four quarters of revenues to date. This figure helps determine whether a company has experienced meaningful top-line growth and identifies the sources of that growth.
Trailing Twelve Months (TTM) Yield
TTM yield is used to analyze mutual fund or exchange-traded fund (ETF) performance. It refers to the percentage of income a portfolio has returned to investors over the last twelve months. This number is calculated by taking the weighted average of the yields of all holdings housed within a fund.
Trailing Twelve Months (TTM) Price-to-Earnings (P/E) Ratio
TTM is also used in calculating the trailing P/E ratio of a company’s stock. Trailing P/E is a relative valuation multiple based on the last twelve months of actual earnings. It is calculated by dividing the current stock price by the TTM EPS. Trailing P/E can be contrasted with the forward P/E, which uses projected future earnings to calculate the price-to-earnings ratio.
Conclusion
Trailing Twelve Months (TTM) figures provide investors and analysts with a comprehensive view of a company’s financial performance over the past twelve months. They allow for a like-to-like comparison of a company’s performance trajectory, smoothing out inconsistencies. TTM figures are widely used in financial analysis, valuation, and investment decision-making.
References
- Investopedia: Trailing 12 Months (TTM): Definition, Calculation, and How It’s Used – https://www.investopedia.com/terms/t/ttm.asp
- Multifamily Loans: Trailing 12 Months Definition and Explanation – https://www.multifamily.loans/trailing-twelve-months/
- Wall Street Prep: Trailing Twelve Months (TTM) – https://www.wallstreetprep.com/knowledge/ttm-trailing-twelve-months/
FAQs
How do I calculate T12 revenue?
To calculate T12 revenue, add up the revenue from the previous four quarters or the last twelve months.
What is the formula for calculating TTM?
The formula for calculating TTM is:
TTM = Latest Fiscal Year Data + YTD Data – Prior YTD Data
How is TTM yield calculated?
TTM yield is calculated by taking the weighted average of the yields of all holdings housed within a fund, whether they be stock, bonds, or other funds.
What is the difference between trailing P/E and forward P/E?
Trailing P/E is calculated using the last twelve months of actual earnings, while forward P/E uses projected future earnings.
Why is TTM important in financial analysis?
TTM is important in financial analysis because it provides a more current and seasonally adjusted view of a company’s financial performance compared to fiscal year-end figures.
How can TTM be used to compare companies?
TTM allows for a like-to-like comparison of a company’s performance trajectory with other companies in the same industry or sector.
What are some limitations of using TTM figures?
TTM figures may not fully capture the impact of recent events or changes in a company’s business, and they may be affected by seasonality or other factors.
How often are TTM figures updated?
TTM figures are typically updated on a quarterly basis, coinciding with the release of a company’s financial statements.