What Does EPS TTM Mean for Company Profitability?

Financial metrics offer a structured approach to evaluate a company’s financial performance. These numerical indicators provide insights into various aspects of a business, from its operational efficiency to its overall profitability. Understanding these metrics helps assess a company’s financial health and its capacity to generate earnings. They serve as objective measures for analyzing a company’s historical performance and its current standing.

Understanding Earnings Per Share (EPS)

Earnings Per Share (EPS) is a fundamental metric that quantifies a company’s profit attributable to each outstanding share of common stock. It is calculated by taking a company’s net income, subtracting any preferred dividends, and then dividing that result by the number of common shares outstanding. This figure shows how much of the company’s profit is allocated to each share.

There are two primary forms of EPS: basic and diluted. Basic EPS considers only the common shares currently outstanding. Diluted EPS provides a more comprehensive view by including the impact of all potential shares that could be issued from convertible securities, such as stock options, warrants, or convertible bonds. This means diluted EPS will be equal to or lower than basic EPS, offering a more conservative estimate of per-share profitability.

Understanding Trailing Twelve Months (TTM)

Trailing Twelve Months (TTM) refers to a financial reporting period that encompasses the most recent 12 consecutive months of a company’s performance data. Unlike a fixed fiscal year, the TTM period is dynamic, constantly rolling forward as new financial data becomes available.

The use of TTM is beneficial in financial analysis because it helps to smooth out seasonal fluctuations that might distort shorter-term financial reports. By observing a full year of activity, TTM provides a more consistent and representative view of a company’s ongoing operational performance.

What EPS TTM Represents

Combining Earnings Per Share (EPS) with the Trailing Twelve Months (TTM) period yields EPS TTM, a metric that reflects a company’s profitability per share over the most recent year. This measure assesses how much profit a company has generated for each outstanding share during the past 12 months. It provides an up-to-date snapshot of earnings performance.

EPS TTM effectively captures the ongoing earning power of a company by incorporating the latest available financial data. Because the TTM period rolls forward, EPS TTM is continuously updated. This metric helps in understanding a company’s recent operational efficiency in generating earnings for its shareholders.

Calculating and Interpreting EPS TTM

Calculating EPS TTM involves specific financial figures obtained from a company’s financial statements. The formula is: (Total Net Income over the Trailing Twelve Months) / (Weighted Average Diluted Shares Outstanding over the Trailing Twelve Months). To apply this, one sums the net income from the most recent four consecutive quarterly reports. The weighted average diluted shares outstanding for the same 12-month period are also needed.

For example, if a company reported net income of $10 million, $12 million, $11 million, and $13 million for its last four quarters, the total net income for TTM would be $46 million. If the weighted average diluted shares outstanding over those four quarters was 20 million, the EPS TTM would be $2.30 ($46 million / 20 million shares). A higher EPS TTM indicates stronger profitability on a per-share basis. However, context is important; comparing a company’s EPS TTM to its historical performance, industry peers, and overall market conditions provides a more meaningful interpretation of the figure.

Where to Find and Apply EPS TTM

EPS TTM data can be readily accessed from several sources. Publicly traded companies provide their financial information in regulatory filings, such as annual reports (10-K) and quarterly reports (10-Q), which are available through the Securities and Exchange Commission (SEC). Many reputable financial websites and data platforms also compile and display EPS TTM figures.

This metric is commonly applied in various financial analyses. One application is in calculating the Price-to-Earnings (P/E) ratio, where the current stock price is divided by the EPS TTM to assess a company’s valuation relative to its recent earnings. EPS TTM is also used for tracking earnings trends over time, allowing for a consistent comparison of a company’s profitability regardless of its fiscal year-end.