Definition
TTM Revenue / LTM Revenues refers to the comparison of a company’s Trailing Twelve Months (TTM) revenue to its Last Twelve Months (LTM) revenues. TTM Revenue is the total revenue a company brought in over the past 12 months, while LTM Revenue is the revenue for the immediately preceding 12 months. It’s essentially a measure of a company’s recent revenue performance, helping to understand if the company’s revenue is growing or shrinking.
Key Takeaways
- TTM Revenue / LTM Revenue is a comparison ratio ideal for determining the revenue growth or contraction of a company over the last twelve months (LTM), with respect to the trailing twelve months (TTM). This indicates the company’s financial health and its ability to generate profits in that period.
- This financial metric can provide valuable insights for investors and stakeholders considering the company’s investment potential. A higher ratio indicates a positive revenue growth trend and thus can be perceived as a positive signal, while a lower ratio could signify a decline in the company’s revenue.
- Despite its usefulness, this ratio should not be used in isolation. It should be accompanied by other financial ratios and indicators for a comprehensive financial analysis. This is because some factors affecting businesses are seasonal or periodic, and using just TTM Revenue / LTM Revenues might not provide a complete picture of the company’s financial position.
Importance
TTM Revenue/LTM Revenues is a vital finance term that serves as a key performance indicator used in financial analysis for understanding the company’s growth from a longitudinal perspective.
TTM stands for Trailing Twelve Months, and LTM is the acronym for Last Twelve Months.
Both of these terms refer to the most recent 12-month accounting period of a company’s operations.
Comparing TTM Revenue/LTM Revenues gives analysts, stakeholders, and potential investors an insight into the revenue growth or contraction of a company over the past year, spotlighting trends and providing valuable information about the financial health and trajectory of the company.
In essence, this metric is essential for assessing a company’s financial growth or decline over an extended period of time.
Explanation
TTM Revenue / LTM Revenues is used in the financial world to compare a company’s most recent trailing 12 months (TTM) revenue with its last 12 months (LTM) revenue. This is a significant metric as it offers insights into the company’s financial health and performance over a period.
By comparing TTM with LTM revenues, investor or analyst effectively assesses the revenue trend, whether it’s growing, shrinking, or remaining consistent. This indicator serves crucially to reflect the changes in the revenue generation over time.
For instance, if the TTM revenue is greater than the LTM revenue, it indicates an upward trend, suggesting the company is expanding or experiencing increased sales. Conversely, if the TTM revenue is less than the LTM, it may signify a decline, potential issues or less effectiveness in generating sales.
Therefore, this measure acts as an essential tool in the decision-making process for investors, shareholders, and business managers when it comes to critical areas such as investment consideration, business performance evaluation, or strategic planning.
Examples of TTM Revenue / LTM Revenues
TTM (Trailing Twelve Months) Revenue and LTM (Last Twelve Months) Revenue are actually the same, both representing an organization’s financial performance over the past 12 months. Here are examples of how these figures can be used in real-world situations:
Comparative Analysis – Suppose company A’s TTM revenue in 2020 was $300k, and its TTM revenue for 2021 is $400k. This would indicate that company A has grown over the past year, as the 2021 TTM revenue is higher than the 2020 TTM revenue. Analysts and investors often use TTM revenue to track a company’s performance and growth across the years.
Valuation Metrics – TTM revenue is often used in calculating ratios like Price-to-Sales. For example, suppose that a publicly-traded company B has a market cap of $2M, and its TTM revenue is $1M. Analysts would calculate the Price-to-Sales ratio as 2M/1M = 2, which provides an indication of how much the market is willing to pay for each dollar of the company’s sales.
Mergers and Acquisitions – Suppose a larger company C wants to acquire a smaller company D. If company D’s TTM revenue is $500K and company C offers $750K for the acquisition, then company D’s value is
5 times its TTM revenue. TTM revenue, in this case, enables company C to value company D in a more realistic and up-to-date manner, reflecting its most recent performance.
FAQs on TTM Revenue / LTM Revenues
What is TTM Revenue?
TTM Revenue, or Trailing Twelve Month Revenue, is a measure of a company’s financial performance used to analyze the last twelve months of a company’s revenues without considering its future projections. It’s commonly utilized by investors to compare a company’s income from operations with those of its competitors.
What is LTM Revenue?
LTM Revenue, or Last Twelve Months Revenue, is very similar to TTM Revenue. It also represents the revenue a company has made in the past twelve months. In the context of financial analysis, both LTM and TTM are used interchangeably.
Why are TTM and LTM Revenues important?
Both TTM and LTM revenues allow investors and analysts to review a company’s financial performance over the last year in a precise manner. This can provide context for a company’s current performance, and can help anticipate potential future performance.
How are TTM and LTM Revenues calculated?
Both TTM and LTM revenues are calculated by adding up the revenues from the last four consecutive quarters. This is done to include an entire year’s worth of income, offering a more reliable measure than only using data from a single quarter or month.
Can TTM or LTM Revenues be negative?
Generally, revenues are not negative because they represent the total income a company has made before any expenses are subtracted. If a company is making sales, they’ll have positive revenue. Negative values in terms of revenues generally indicate losses or return of sales.
Related Entrepreneurship Terms
- Financial Reporting: This refers to the communication of financial information, like balance sheets and income statements, to company stakeholders. TTM and LTM revenues are key figures in these reports.
- Revenue Recognition: This refers to the process of recognizing revenue when it has been earned and becomes realizable. It impacts both TTM (Trailing Twelve Months) and LTM (Last Twelve Months) revenues.
- Annual Report: This is a yearly publication that public companies produce to provide detailed information about the company’s activities and financial performance which includes TTM and LTM revenues.
- Operating Income: This is a profitability measurement that shows how much profit a company makes from its core operations, excluding taxes and interest. It’s calculated using revenue figures like TTM and LTM revenue.
- EBITDA: Standing for Earnings Before Interest, Taxes, Depreciation, and Amortization, this is a measure of a company’s operational profitability. Like TTM/LTM revenue, it’s a common financial metric used to assess company performance.
Sources for More Information
- Investopedia – A comprehensive website that provides detailed insight into all sorts of finance and investment related topics.
- CFO – A website specifically catering to financial executives offering insights on TTM Revenue / LTM Revenues concept.
- Accounting Tools – A website dedicated to presenting in-depth accounting information and comprehensive explanations of financial principles.
- NASDAQ – Helpful for obtaining real-time market insights and advanced trading tools, plus articles and tips about various finance terms including TTM Revenue / LTM Revenues.
