What it means
An LTM figure answers a simple question: what has this business actually done over the last year, measured from today rather than from an arbitrary year end. It can be built for revenue, gross profit, earnings before interest, tax, depreciation and amortisation, or almost any line item, provided the same basis is used throughout.
It matters most in valuation and lending. A buyer offering a multiple of earnings will normally apply it to LTM earnings rather than to the last audited year, because eight or nine months of newer trading tells them more about what they are buying than a figure closed the previous December.
The standard way to build it is to take the last full fiscal year and add the current year to date, then subtract the equivalent year to date from the prior year, which removes the months that would otherwise be counted twice. Doing this monthly produces a rolling series that flags a turning point in the business several months before the annual accounts would.
The usual caveat is quality. LTM figures blend audited and unaudited months, so the interim portion carries whatever accrual, stock valuation and cut-off weaknesses the management accounts have, and any acquisition or disposal inside the window needs adjusting before the number is comparable.
Because of this, buyers often ask for an adjusted LTM figure that strips out one-off items such as legal settlements, restructuring costs or a founder's above-market salary. The adjustments themselves become a negotiation, which is why serious deals include a quality of earnings review over exactly this period.
In practice
Real-world examples.
Example
A private equity buyer reviewing a distribution business in October refuses to price off the previous December's accounts. It builds LTM revenue and earnings to 30 September, discovers that margin has slipped two percentage points since the year end, and reduces its offer accordingly.
Example
A bank monitoring a covenant tests debt against LTM earnings every quarter rather than annually. The borrower's earnings dip in the spring is caught within three months, triggering a conversation about the facility long before an annual test would have.
Example
A seasonal ski equipment retailer uses LTM revenue in its monthly board pack because any three-month window would be wildly misleading. The rolling figure shows a steady 6% climb even in months when comparisons against the previous month look alarming.
Formula
Calculation
LTM Figure = Last Full Fiscal Year + Current Year to Date - Prior Year Same Period to Date
A components business has a fiscal year ending 31 December. Revenue for the year to 31 December 2024 was $24,000,000. Revenue for the nine months to 30 September 2025 was $19,500,000, and revenue for the nine months to 30 September 2024 was $17,100,000.
LTM revenue to 30 September 2025 is $24,000,000 + $19,500,000 - $17,100,000 = $26,400,000. Compared with the last full year, that is growth of ($26,400,000 - $24,000,000) / $24,000,000 = 0.10, or 10%.
The same method applies to earnings. Full year 2024 earnings before interest, tax, depreciation and amortisation were $3,000,000, the nine months to September 2025 were $2,600,000, and the same nine months of 2024 were $2,300,000, giving LTM earnings of $3,000,000 + $2,600,000 - $2,300,000 = $3,300,000. That is a margin of $3,300,000 / $26,400,000 = 0.125, or 12.5%, and at a seven times multiple it implies an enterprise value of 7 x $3,300,000 = $23,100,000.Case study
Seen in the real world.
Halberd Instruments is an illustrative, fictional maker of laboratory equipment that went to market in October 2025. Its advisers led with audited revenue of $24,000,000 for the year to December 2024, and the first round of bids came back priced off that figure.
The finance team then produced an LTM pack to 30 September 2025 showing revenue of $26,400,000 and earnings of $3,300,000, built by adding the nine months to September 2025 of $19,500,000 and $2,600,000 and subtracting the same nine months of 2024 of $17,100,000 and $2,300,000. At the seven times multiple the bidders were using, the enterprise value implied by LTM earnings was $23,100,000 rather than the $21,000,000 implied by the older full-year earnings of $3,000,000.
In this fictional case the buyers accepted the LTM basis but insisted on a quality of earnings review, which reclassified $150,000 of capitalised development spend as an operating cost. The illustrative point is that LTM figures win you a more current valuation base and, in the same breath, invite far closer scrutiny of the unaudited months inside them.
Watch out
Common mistakes.
- Adding the current year to date to the last full year without subtracting the prior year equivalent period, which double counts several months and inflates the figure badly.
- Presenting an LTM number as though it were audited, when only the portion falling inside the last completed fiscal year has been through an audit.
- Ignoring an acquisition or disposal that occurred inside the twelve-month window, so the resulting figure mixes periods with and without that business.
Questions
People also ask.
Is LTM the same as trailing twelve months?
Yes, the two terms are used interchangeably, along with rolling twelve months, and all three describe the same calculation.
Why not just use the latest fiscal year?
Because by the time a fiscal year is closed and audited it can be six to nine months old, while an LTM figure is usually no more than one month behind.
Can LTM be calculated for cash flow as well as profit?
Yes, and rolling twelve-month operating cash flow is often more revealing than profit, since it strips out much of the accounting judgement in the interim months.
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