What Is LTM Revenue and Why Does It Matter?
Gain clarity on LTM revenue, a pivotal financial metric for assessing a company's ongoing performance and its true economic health.
Last Twelve Months (LTM) revenue is a financial metric providing a current, rolling view of a company’s sales performance. It offers a timely assessment of revenue generation, reflecting up-to-date trends and aiding in understanding financial health.
Defining LTM Revenue
LTM revenue, also known as Trailing Twelve Months (TTM), represents a company’s total revenue over the most recent 12-month period. This period is not tied to a fiscal year-end; it continuously updates with each new financial reporting period. For instance, quarterly reporting incorporates the latest quarter’s results by dropping the oldest quarter from the previous LTM calculation. LTM revenue smooths out seasonal fluctuations, providing a normalized view of ongoing sales activity. This ensures the data reflects recent trends and changes in business conditions, aiding investors and analysts.
Calculating LTM Revenue
Calculating LTM revenue involves combining data from annual financial statements and recent interim reports. For publicly traded companies, this information is available in U.S. Securities and Exchange Commission (SEC) filings (10-K and 10-Q). The general approach is to take revenue from the most recently completed fiscal year, add revenue from current year-to-date periods, and subtract revenue from corresponding prior year-to-date periods. For example, to calculate LTM revenue as of the end of the first quarter of 2025, take full fiscal year 2024 revenue, add Q1 2025 revenue, and subtract Q1 2024 revenue. The formula is: LTM Revenue = Revenue (Most Recent Full Fiscal Year) + Revenue (Current Year-to-Date) – Revenue (Prior Year’s Corresponding Year-to-Date Period).
LTM Revenue Compared to Other Metrics
LTM revenue offers distinct advantages compared to other common revenue metrics like annual, quarterly, and year-to-date (YTD) revenue. Annual revenue provides a snapshot over a fixed fiscal year, while LTM revenue updates continuously, making it more responsive to recent performance changes. Quarterly revenue is often short-term and influenced by seasonality; for example, a retail company might have significantly higher revenue in the fourth quarter due to holiday sales. LTM revenue smooths these effects by encompassing a full 12-month cycle. YTD revenue covers the period from the start of the current fiscal year up to a specific date, but LTM revenue consistently covers the most recent 12 months, even spanning two different fiscal years, offering a more complete view of ongoing operations.
Practical Applications of LTM Revenue
LTM revenue is a widely used metric in financial analysis for valuation and assessing growth trajectory. Its common application is in calculating valuation multiples, such as Price-to-Sales (P/S) or Enterprise Value (EV) to Sales. These multiples allow analysts and investors to compare companies based on recent operational performance, especially useful for companies with different fiscal year-ends as LTM revenue standardizes the comparison period. LTM revenue also helps assess growth momentum and identify sales performance trends. Tracking it over multiple periods reveals consistent growth or potential declines, offering insights into a company’s financial health. Financial professionals use this metric for informed investment decisions and understanding a business’s capacity to generate income consistently.