For public companies and securities, trailing 12 months (TTM) is a means to see how they've performed over the last year. It's useful for investors and analysts to use a TTM reading of a company's price-to-earnings ratio, earnings, or sales, for example, to analyze data that is not bound to the calendar year or a company's fiscal year. EPS and revenue data may be shown as TTM to indicate based on the past year's results.

What Exactly Does TTM Stand For?

The shorthand for TTM is a metric for the last years’ worth of data. When discussing a company's most recent financial disclosures, the term "TTM" is used to refer to the 12 months preceding the current month.

Companies and financial analysts use TTM data as a 12-month yardstick to assess recent performance, separate from a company's fiscal year, the current calendar year or an YTD metric.

Balance sheet numbers, profit and loss statements, and revenue and cash flow charts may be analyzed using TTM. Remember that the 12-month period referred to by any particular TTM data varies from financial information to financial statement.

Corporate Financial Reporting and TTM

Since the TTM format contains the most recent financial data, it is a crucial tool for organizations budgeting their finances. When it comes to items like working capital, sales growth, and profit margins, seasonal influences can significantly impact the results.

TTM measurements give managers a quick snapshot of a company's financial well-being. Consistently looking at the last 12 months removes seasonality, short-term volatility, and one-time charges, providing a more accurate depiction of a company's current financial situation.

Equities research and TTM

Quarterly financial reports in the form of securities filings are made available by publicly traded corporations. GAAP, or generally accepted accounting standards, dictates that the trailing 12-month data in these reports be updated quarterly.

For a firm to be considered promising, it must have fared well in the last year. One of Lexington Avenue Capital Management's senior executives said, "TTM has been around for a long time and is still a key predictor of both performance and potential."

How to Determine TTM Figures

According to TTM, a company's total revenue for the current fiscal year is divided by last year's total revenue minus the prior year's total revenue. It's critical to look at the year rather than simply the most recent quarter.

Here's an illustration of what I mean. Q2 of 2021 is upon us. Manufacture, a firm you're investigating, just announced $10 billion in revenues for the first three months, compared to $33 billion in revenues for the same period last year and $6 billion for the same period the previous year. You multiply ten by 33 and remove 6 to arrive at $37 billion in TTM revenue.

TTM Yield: How to Analyze a Mutual Fund's

The TTM yield gives current statistics from a fund's average returns and interest distributions. For example, if you're looking at a mutual fund, you'll notice that the fund's current yield is 3.0%. The fund would have averaged $3,000 for every $100,000 you had invested in it during the past year.

You've only seen the previous year's average returns using this strategy. Using the TTM yield, there is no way of determining how the fund will fare in the future.

SEC Yield

Another approach to gauge a fund's performance is its SEC yield. When predicting short-term returns, you may use the SEC yield as a guide. Because the SEC yield is calculated by comparing a fund's prior month's results, it provides a more accurate depiction of the fund's current returns. As a result, it can estimate how it might do over the following 30 days, assuming all other market conditions remain the same.

Bond Fund Yields: A Look Ahead

Stock and bond fund returns have been disappointing in recent years. As a result, rates and yields on bonds are anticipated to climb in the long run from their current lows.

Bond returns, on the other hand, are very variable. Returns on bond funds grew in 2018 but then fell in 2019 and declined severely in 2020. Bond fund returns fell in both years. Returns began to rise again in the first half of 2021, returning to levels before the outbreak.

The Verdict

Investors looking at 12-month trailing fund returns aren't seeking growth but rather a constant income stream. A fund's 12-month performance may be gleaned from its TTM yield. Because of this, the TTM yield is not a good indicator of how much money you'll make in a particular fund in the long run.

The fund's portfolio may change, or the value of the underlying assets may decline. The TTM yield can help you decide if a fund is worth investing in when used with other ratios and measures.