Trailing 12 months (TTM) is the timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months represent its financial performance for a 12-month period, but typically not at its fiscal year end. Since quarterly reports rarely report how the company has done in the prior 12 months, TTM tends to be calculated manually, by adding together the last four quarterly values.
Much of fundamental analysis is about comparing a measurement against a previous time frame to see how much it grew or declined. A company with $1 billion in revenue is interesting. A company that grew revenues from $.5 billion to $1 billion in one year is even more interesting.
Some analysts report earnings every quarter, while others report earnings once a year. What about measures that change on a daily basis, such as stock price? It's easy to compare the price of a stock today against the price of a stock tomorrow or a year from now, but what if you want to compare today's stock price to a measure that's only reported annually and updated once a quarter, such as the price-to-earnings ratio? In this case, analysts can use the last trailing 12 months, or TTM, for a more relevant measure. The annual time period is not current, and the quarterly time period may skew performance. Twelve months, and specifically the last 12 months, provides investors with a compromise that is both current and seasonally adjusted.
For line items on the balance sheet, such as cash, property and liabilities, the 12-month measure is taken from the most recent balance sheet, which is updated quarterly. Some analysts take an average of the first quarter and the last quarter. For line items on the income statement, such as revenues, expenses and net income, analysts take the four most recent quarters. Line items on the cash flow statement, such as working capital, capital expenditures and dividend payments, should be treated based on the feeding financial statement. For example, working capital is comprised of balance sheet line items, which are averaged. However, depreciation is deducted from income on a quarterly basis, so analysts look at the last four quarters as reported on the income statement.