LTM Revenue: Definition & Importance in Financial Analysis

LTM stands for “Last Twelve Months” and is similar in meaning to TTM, or “Trailing Twelve Months.” LTM Revenue is a popular term used in the world of finance as a measurement of a company’s financial health. It reports or calculates the revenue figures for the “past 12 months.” LTM or TTM Revenue shows a company’s performance in the past year rather than just seeing the quarterly figures and adjusting it for the full year.Fiscal Year (FY)A fiscal year (FY) is a 12-month or 52-week period of time used by governments and businesses for accounting purposes to formulate annual

It is possible that a certain quarterly period may be good or bad because of several factors, such as seasonal impact, labor problems, high sales during the festive season, etc. LTM figures are used to average out the effects, so proper conclusions can be reached.

A balance sheetBalance SheetThe balance sheet is one of the three fundamental financial statements. The financial statements are key to both financial modeling and accounting. is never affected by this calculation, as a balance sheet is prepared on a certain date and at a single point of time, regardless of the events throughout the year.

Example of LTM Revenue

For the period ending August 2017, the LTM period will be from “September 2016 to August 2017.”

The LTM revenue is used especially by analysts and acquirers while valuing the firm or rating it as Overweight, Neutral, etc., as they want to see the company’s growth potential and performance in relation to its peers.

 Oct - Dec 2015Jan - Mar 2016Apr - June 2016July - Sept 2016Oct - Dec 2016Revenue100120140150200

LTM Revenue for September 2016: 100 + 120 + 140 + 150 = 510

LTM Revenue for December 2016: 120 + 140 + 150 + 200 = 610

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Why do Analysts use LTM Figures?

• LTM is considered useful in assessing the most recent business performance indicative of the company’s current trend.
• LTM figures are more current than the fiscal or annual financial statements, which helps avoid potentially misleading short-term measurements.
• LTM figures can be used to compare the relative performance of similar companies within an industry or sector that may have different year ends.
• LTM figures provide a more accurate value of a business in the event of an acquisition.
• LTM gives a relevant measurement of the P/E ratio.

Related Readings

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