Calculating LTM Figures From 10-Ks and 10-Qs

Introduction

A company publishes a full fiscal year of results only once a year, but bankers value it every day. A valuation in October that rests on the previous December's earnings before interest, taxes, depreciation and amortization (EBITDA) uses figures that are ten months stale, and for a company growing or shrinking quickly that can distort an enterprise value to EBITDA multiple badly. The fix is to use the last twelve months, or LTM, the most recent four quarters of results, also called trailing twelve months (TTM).

Companies rarely present LTM figures in their financial statements, so bankers build them from the annual report and the latest quarterly report. The arithmetic is simple. The judgment lies in knowing which figures can be rolled forward, which cannot, and which adjustments have to be applied to the whole twelve-month window rather than to part of it.

Quarterly reports are built to make the calculation possible. Under Rule 10-01 of Regulation S-X, as reproduced in Deloitte's guide to interim financial statements, a 10-Q presents income statements for the latest quarter and the year to date (YTD), with the corresponding periods of the previous year, and cash flow statements for the year to date and the prior-year equivalent. The rule also allows a company to present the cumulative twelve months ended with the latest quarter, though few do.

With those figures, LTM is the last full fiscal year, plus the current year-to-date period, minus the same year-to-date period of the previous year:

Last twelve months (LTM)

A company's results for the most recent twelve-month period for which it has reported, usually built as the last fiscal year plus the current year-to-date period less the corresponding year-to-date period of the previous year. Also called trailing twelve months (TTM).

For a calendar-year company that has just filed its third-quarter 10-Q, the calculation uses the full-year figures from the 10-K and the nine-month figures from the 10-Q:

The LTM EBITDA of $890 million is $90 million higher than the fiscal 2024 figure, because the first nine months of 2025 were stronger than the same months of 2024. At a 10x multiple, using the stale annual number instead would understate the valuation by $900 million. The window now covers October 2024 to September 2025: the fourth quarter of 2024 is still inside it, and the first nine months of 2024 have dropped out.

The formula only works for flow figures, amounts that accumulate over a period. Everything on the income statement and the cash flow statement qualifies: revenue, EBITDA, net income, capital expenditure, operating cash flow and free cash flow can all be built on an LTM basis in the same way. Balance sheet figures are different, because they are stock figures measured at a single date, the distinction between period and point-in-time statements set out in the three financial statements explained. Adding and subtracting balances from different dates produces a meaningless number.

The practical rules follow directly:

The last point matters more than it seems. Fourth-quarter figures often absorb year-end adjustments, such as inventory counts, bonus true-ups or impairment charges, so a derived fourth quarter can look unusual. A company that does not report the quarter separately must disclose material fourth-quarter adjustments in a note to its annual financial statements under the interim reporting rules of Accounting Standards Codification (ASC) Topic 270, and that note, together with the earnings release, is the check before a derived quarter is used. Companies with 52- or 53-week fiscal years, common in retail and technology, add a further wrinkle: every five or six years one quarter contains an extra week, which inflates that quarter's revenue by roughly a thirteenth and should be adjusted out when comparing growth rates. Where the figures come from in each filing is laid out in how to read a 10-K and 10-Q.

Reported LTM figures are a starting point. Bankers usually adjust them before using them, and the key rule is that every adjustment applies across the whole twelve-month window, not just to the part where it happens to be visible.

One-Time Items

A restructuring charge recorded in the fourth quarter of 2024 sits inside the LTM window in the example above; one recorded in the second quarter of 2024 has dropped out of it. Normalizing LTM EBITDA means identifying the unusual items in each piece of the calculation and removing them from every piece that contains them, so that only items inside the window change the result. Adding back a charge to the full-year figure while forgetting that the prior-year year-to-date period also contained it removes it twice, overstating LTM EBITDA by the full amount of a charge that sits outside the window. The tests for deciding what counts as one-time are in one-time items on the income statement.

Acquisitions, Disposals and Discontinued Operations

When a company buys a business partway through the window, its reported LTM figures include the target only from the acquisition date. For leverage and valuation purposes, bankers usually prepare a pro forma LTM figure that includes the target's results for the full twelve months, the same convention credit agreements typically apply when they measure leverage over the latest four quarters. Disposals work in reverse: a business sold or classified as a discontinued operation should be removed from every piece of the calculation. Pro forma presentation for public filings follows its own rules, covered in pro forma financial statements, and the presentation of businesses being exited in discontinued operations.

LTM figures are backward-looking, which is their strength: they are reported, reviewed or audited, and comparable across companies. Valuation work also uses two forward or annualized alternatives. Next twelve months (NTM) figures come from forecasts, usually consensus research estimates, and suit companies whose earnings are changing quickly. Run-rate figures annualize the latest quarter, multiplying it by four, which captures recent momentum but ignores seasonality. A retailer whose fourth quarter carries the holiday season would look very different on a run-rate built from its third quarter.

Next twelve months (NTM)

A company's projected results for the twelve months following the valuation date, usually taken from consensus research estimates. NTM multiples are forward-looking counterparts to LTM multiples and are preferred when earnings are expected to change quickly.

Each measure answers a different question, so the choice should match the purpose: LTM for what the business has demonstrably earned, NTM for what the market expects it to earn, and run-rate only for businesses whose latest quarter genuinely represents the level going forward, such as a company that has just completed a large acquisition or price increase.

Trading comparables usually show both LTM and forward multiples side by side, with LTM preferred when forecasts are unreliable and NTM when earnings are moving fast. Whatever the multiple, the LTM figure underneath should be traceable to specific lines in specific filings, adjusted consistently across the window, and paired with a balance sheet measured at the end of that window. When those three conditions hold, an LTM number is the most reliable earnings figure a banker can put in front of a client.