Using trailing 12-month (TTM) figures is an effective way to analyze the most recent financial data in an annualized format. Annualized data is important because it helps neutralize the effects of seasonality and dilutes the impact of non-recurring abnormalities in financial results, such as temporary changes in demand, expenses or cash flow. By using TTM, analysts can evaluate the most recent monthly or quarterly data rather than looking at older information that contains full fiscal or calendar year information. TTM charts are less useful for identifying short-term changes and more useful for forecasting.
Companies conducting internal corporate financial planning and analysis have access to detailed and very recent financial data. They use the TTM format to evaluate key performance indicators (KPI), revenue growth, margins, working capital management and other metrics that may vary seasonally or show temporary volatility.
In the context of equity research and valuation, financial results for publicly traded companies are only released on a quarterly basis in securities filings in accordance with generally accepted accounting principles (GAAP). Less frequently, firms provide monthly statements with sales volumes or key performance indicators. Securities and Exchange Commission (SEC) filings generally display financial results on a quarterly or year-to-date basis rather than TTM. To get a clear picture of the last year of performance, analysts and investors often must calculate their own TTM figures from current and prior financial statements. Consider General Electric (GE)'s recent financial results. In Q1 2015, GE generated $29.4 billion in revenue versus $34.2 billion in Q1 2014. GE logged $148.6 billion of sales for the full year of 2014. By subtracting the Q1 2014 figure from the full-year 2014 figure and adding Q1 2015 revenues, you arrive at $143.8 billion in TTM revenue.