What is Trailing Twelve Month Data and why is it used?

What is Trailing Twelve Month or “TTM” Data

Trailing twelve months refers to a company’s financial data over the past 12 months and should not be confused with annual data which a company reports at the end of each accounting year. TTM numbers can be calculated at any point in time during a year unlike annual data, which is reported only once during a year. As a result, the numbers don’t necessarily coincide. However, when a company has just reported its full-year reports, the TTM calculation would be the same as its annual numbers. 

The example we have provided below should make it easy to understand how TTM data is calculated.

Facebook reported revenue of $18.7m in Q2 2020. Going back to the previous three quarters, the revenues reported for Q1 2020, Q4 2019, and Q3 2019 were $17.7m, $21.1m, and $17.6m, respectively. Adding up those numbers, we arrive at $75.1m in TTM revenue. Using this TTM revenue we can measure the performance of Facebook over a full year period (12 months).

Why is TTM used?

By looking at the trailing 12 months data, we are able to evaluate a company’s most recent performance over a longer period of time than just the quarterly performance. This way, investors and analysts can assess a company’s annualized performance instead of looking at the annual performance over the previous fiscal year, which usually contains old data.

In our Facebook example above, the TTM revenue of $75.1m is a better and more “current” measure of the company’s performance compared to the annual figure of $70.7m reported at the end of December 2019. Why is it better? While performing valuation analysis or looking at future growth projections (PE or PEG ratios for example), using old data from the annual report might not provide an accurate picture of the company’s health. Plus, TTM data is a more relevant comparison to long-term analyst estimates as analysts base their projections on the most recent data. PE/PEG article link somewhere here

By using TTM data, we would be acting on more recent and relevant information which would be helpful in taking more informed decisions related to any investments.

Are Simply Wall Street’s company reports based on TTM data?

Unless specified all financial data reported on SWS platform are on a trailing twelve month or last twelve months (LTM) basis. The data generally gets updated every quarter when companies report their earnings. To know more about how often the data on our platform is updated check out this link: How often is the data updated

 

 

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