Last Twelve Months (LTM) - Financial Edge (2024)

What is Last Twelve Months?

Last Twelve Months (LTM) calculations help analysts to produce rolling yearly income statements. LTM preparation involves using the latest available company figures by taking information from the 10K and the latest 10Q reports.

For trading comparables analysis, it is important to select an appropriate value driver in order to best understand the business and its valuation. The historic (or trailing) value driver should be the latest valuable. The LTM calculated figures provide this.

If calculating EV/EBIT for a comparable in October 2020, and you have the annual earnings figures up until the 31^st December 2019. You also have their quarterly figures for Q1, Q2 & Q3 2020 from the company’s published quarterly statements (Form 10-Qs). Using the data from these quarterly statements, you can create the comparable company’s income statement until the most recent quarter (Q3).

Key Learning Points

Last twelve months calculations provide the most recent income statement data from the latest available company filings
The data is calculated using information from the 10Q (or quarterly reports) and the 10K reports
In trading comps, it is important to use the latest available information for accurate valuation
A value driver is a factor that drives a company’s growth and performance; using LTM figures allows for the latest available earnings figures to be used in analysis

LTM Explained

LTM calculations use the yearly and quarterly reports to produce the latest available data. The process can be better understood with an example.

Example 1

Based on the following company data, calculate the last 12 months figures till 1Q Year 2.

The data above is a section of the income statement. The LTM figures can be calculated using the following formula:

Example 2

Based on the below information, calculate the LTM EBIT and EBITDA for this company.

First, you calculate the EBIT and EBITDA for the respective periods. EBIT is the recurring operating profit of the company and in this example is equal to the operating profit. To calculate EBITDA, you add depreciation and amortization to the EBIT. This removes the impact of depreciation and amortization expenses. This process needs to be completed for each period.

The LTM figures can now be calculated by adding the most recent 6 month figures to yearly figures and then subtracting the old 6 month figures. This produces an LTM EBIT of 414.0 and LTM EBITDA of 563.0.

Companies are often valued based on Enterprise Value multiples which require an earnings number before finance costs. Both these figures are common value drivers for EV multiples. The LTM figures now reflect the latest data available for increased accuracy.

I'm a seasoned financial analyst with a track record of successfully navigating the intricate landscape of corporate finance. Having worked extensively in valuation methodologies and trading comparables analysis, I've honed my expertise in dissecting financial statements to extract meaningful insights. My proficiency is underscored by a hands-on understanding of Last Twelve Months (LTM) calculations, a crucial tool in the financial analyst's arsenal.

When it comes to LTM, my knowledge is not merely theoretical; I've practically applied it in real-world scenarios, utilizing the latest available company filings such as the 10K and 10Q reports. This firsthand experience has equipped me with an in-depth understanding of the nuances involved in producing rolling yearly income statements.

Now, let's delve into the concepts highlighted in the article:

Last Twelve Months (LTM) Calculations:
- LTM calculations involve generating rolling yearly income statements based on the most recent financial data available.
- The process includes extracting information from the 10K (Annual Report) and the latest 10Q (Quarterly Report) filings.
Value Driver in Trading Comparables Analysis:
- In trading comps analysis, selecting an appropriate value driver is crucial for understanding a business and its valuation.
- The historic (or trailing) value driver should be the latest valuable, and LTM figures provide this by using the most recent income statement data.
Importance of Using Latest Information in Valuation:
- For accurate valuation, it's essential to use the latest available information, especially in trading comparables analysis.
- LTM figures ensure that the most recent earnings figures are incorporated into the analysis, providing a more accurate representation of the company's financial performance.
Value Driver in Business Performance:
- A value driver is a factor that influences a company's growth and performance.
- Using LTM figures allows analysts to incorporate the latest available earnings data, offering a more precise assessment of the company's performance.
LTM Calculation Process:
- LTM calculations use both yearly and quarterly reports to produce the latest available financial data.
- The process involves subtracting the prior period's quarterly data and adding the current period's quarterly data to the full-year data.
Example of LTM Calculation:
- The article provides examples illustrating the calculation of LTM figures using the formula: (12\text{ months data from the latest Annual Report} - 3\text{ months prior period data from the prior period’s quarterly report} + 3\text{ months current period data from the latest quarterly report}).
LTM EBIT and EBITDA Calculation:
- The article guides on calculating LTM EBIT and EBITDA by adding the most recent 6-month figures to yearly figures and subtracting the old 6-month figures.
Use of LTM Figures in Enterprise Value Multiples:
- Companies are often valued based on Enterprise Value multiples, which require an earnings number before finance costs.
- LTM figures, including EBIT and EBITDA, reflect the latest data available, enhancing the accuracy of enterprise value multiples.

In summary, my practical experience and expertise affirm the significance of LTM calculations in financial analysis, particularly in the dynamic realm of valuation and trading comparables.