After discussing the term and representation of TTM, we move on to the use and calculation of TTM. It is important to understand the measurement of TTM first before elaborating the calculation. In order to interpret how much growth in the stock, TTM analyses would compare a measurement against the prior term measurement. For instance, if the company reported $1bn revenue is rather impressive, it would be more impressive if the company used TTM to show its increased revenue. Thus, there is a clear picture on the company’s growth trajectory.
The formula for TTM is actually only adding up the previous four quarters of revenues. TTM Revenue = current Q earnings + Q-1 earnings + Q-2 earnings + Q-3 earnings. So, if we apply this formula in the report, it would be like this following example;
ABCDE company for instance generated $29.4 billion for its Q1 revenue when the quarter just ended. Then, the company’s previous quarter was $33.5 billion. Before that, the company gained the quarter for as much as $30 billion, and $21.9 billion before that. So, the calculation is $29.4 + 33.5 + 30 + 21.9 = $87.8 billion.
There is also a term called TTM Yield. In TTM Yield, analysts use it to analyze mutual fund or ETF performance. By definition, TTM Yield us the income percentage a portfolio has returned to investors over a year. The calculation would take the weighted average of the yields of all holdings within a fund. This could be in the form of stocks, bonds, or other funds, said Investopedia. However, TTM Yield could also be for the dividend yield of a stock paid prior over 12 months.