What does ltm mean in finance?

Introduction

In the world of finance, there are numerous acronyms and abbreviations that can be confusing for those not familiar with the industry. One such acronym is LTM, which stands for “Last Twelve Months.” LTM is a commonly used term in finance that provides a snapshot of a company’s financial performance over the past year. In this article, we will dive deeper into what LTM means in finance and how it is used by investors and analysts.

Understanding LTM

Definition: LTM, or Last Twelve Months, refers to the financial data of a company over the most recent twelve-month period. It is a rolling measurement that is constantly updated as each month passes. LTM is often used to analyze a company’s financial performance and trends over time.

Calculation: To calculate LTM figures, financial data from the company’s income statement, balance sheet, and cash flow statement for the past twelve months are aggregated. This includes revenue, expenses, net income, assets, liabilities, and cash flows. By summing up the data from each of the past twelve months, a comprehensive picture of the company’s financial performance is obtained.

Uses of LTM: LTM figures are widely used by investors, analysts, and financial professionals for various purposes. Some common uses include:

1. Comparative Analysis: LTM figures allow for easy comparison of a company’s financial performance over different periods. By comparing LTM data from the current year to the previous year or other relevant periods, analysts can identify trends and assess the company’s growth or decline.

2. Valuation: LTM figures are often used in valuation models to estimate a company’s worth. By using the most recent financial data, analysts can calculate key valuation metrics such as price-to-earnings ratio (P/E ratio), price-to-sales ratio (P/S ratio), or price-to-cash flow ratio (P/CF ratio).

3. Forecasting: LTM figures can also be used as a basis for forecasting future financial performance. By analyzing the trends and patterns in the LTM data, analysts can make projections and predictions about the company’s future revenue, earnings, and cash flows.

4. Due Diligence: LTM figures are crucial in conducting due diligence when evaluating potential investment opportunities or during mergers and acquisitions. They provide a comprehensive view of a company’s financial health and help investors and acquirers make informed decisions.

Conclusion

LTM, or Last Twelve Months, is a term used in finance to refer to a company’s financial data over the most recent twelve-month period. It provides a snapshot of the company’s financial performance and is widely used by investors, analysts, and financial professionals for comparative analysis, valuation, forecasting, and due diligence purposes. Understanding LTM figures is essential for anyone involved in financial analysis and decision-making.