EPS TTM is an important financial metric used by investors and analysts to evaluate the profitability of a company. EPS TTM stands for Earnings Per Share Trailing Twelve Months, which is a company’s net income over the past 12 months divided by the number of outstanding shares of stock. This calculation provides a measure of a company’s profitability on a per-share basis.
Understanding EPS
EPS is a commonly used financial metric that provides a measure of a company’s profitability on a per-share basis. It is calculated by dividing a company’s net income by the number of outstanding shares of stock. EPS is important because it is one of the key factors that investors use to determine a company’s value.
EPS TTM is a variation of the EPS calculation that uses the company’s net income over the past 12 months, rather than a single quarter or fiscal year. The TTM acronym stands for “trailing twelve months”, which means the metric takes into account the most recent 12-month period of a company’s financial performance.
Why EPS TTM is Important
EPS TTM is important for several reasons. First, it provides a more accurate picture of a company’s profitability over time than a single quarter or fiscal year. This is because a company’s financial performance can vary widely from quarter to quarter or year to year, and EPS TTM smooths out these fluctuations to provide a more reliable measure of a company’s profitability.
Second, EPS TTM is an important metric for investors because it allows them to compare the profitability of different companies on a per-share basis. For example, if two companies have similar net incomes but different numbers of outstanding shares, EPS TTM can help investors determine which company is more profitable on a per-share basis.
Finally, EPS TTM is a useful tool for analysts because it provides a measure of a company’s profitability that is independent of its capital structure. This means that EPS TTM can be used to compare the profitability of companies with different levels of debt or equity financing.
Limitations of EPS TTM
While EPS TTM is a useful metric for evaluating a company’s profitability, it is not without limitations. One of the main limitations of EPS TTM is that it does not take into account the dilution effect of stock options, warrants, or convertible securities. This means that EPS TTM may overstate a company’s profitability if it has a large number of outstanding stock options or other dilutive securities.
Another limitation of EPS TTM is that it does not take into account the impact of unusual or one-time events, such as asset sales or write-offs, on a company’s profitability. This means that EPS TTM may not provide a complete picture of a company’s financial performance in certain situations.
Understanding TTM
TTM stands for Trailing Twelve Months, which is a financial metric that represents the past 12 months of a company’s financial performance. TTM is used by investors and analysts to evaluate a company’s financial performance over a longer period than a single quarter or fiscal year.
TTM is calculated by taking the sum of a company’s financial performance over the past 12 months. This can include revenue, net income, or any other financial metric that is relevant to the company’s operations. By using TTM, investors and analysts can get a more accurate picture of a company’s financial performance over time.
Understanding EPS TTM
EPS TTM is a variation of the EPS calculation that uses a company’s net income over the past 12 months, rather than a single quarter or fiscal year. EPS TTM provides a measure of a company’s profitability on a per-share basis.
EPS TTM is important because it provides a more accurate picture of a company’s profitability over time than a single quarter or fiscal year. This is because a company’s financial performance can vary widely from quarter to quarter or year to year, and EPS TTM smooths out these fluctuations to provide a more reliable measure of a company’s profitability.
EPS TTM can be calculated by dividing a company’s net income over the past 12 months by the number of outstanding shares of stock. This calculation provides a measure of a company’s profitability on a per-share basis.
How To Calculate EPS TTM
Calculating EPS TTM involves two steps: calculating a company’s net income over the past 12 months and dividing that by the number of outstanding shares of stock.
To calculate a company’s net income over the past 12 months, you can take the sum of the company’s net income over the four most recent quarters. For example, if a company’s net income was $1 million in Q1, $2 million in Q2, $3 million in Q3, and $2 million in Q4, the company’s net income over the past 12 months would be $8 million.
To calculate EPS TTM, you would then divide the net income over the past 12 months by the number of outstanding shares of stock. For example, if the company had 1 million outstanding shares of stock, EPS TTM would be $8 million / 1 million shares = $8 per share.
It’s important to note that EPS TTM can be affected by factors such as stock options, warrants, and convertible securities, which can dilute the value of outstanding shares. To get a more accurate picture of a company’s financial performance, it may be useful to calculate other financial metrics in addition to EPS TTM.
EPS TTM Example
To better understand EPS TTM, let’s consider an example. Let’s say that Company XYZ has a net income of $10 million over the past 12 months and has 1 million outstanding shares of stock. To calculate EPS TTM, we would divide the net income by the number of outstanding shares:
EPS TTM = $10 million / 1 million shares = $10 per share
This means that Company XYZ has earned $10 per share over the past 12 months.
Now, let’s say that in the previous fiscal year, Company XYZ had a net income of $8 million and 800,000 outstanding shares of stock. If we calculate EPS for the previous fiscal year, we would divide the net income by the number of outstanding shares:
EPS = $8 million / 800,000 shares = $10 per share
This means that in the previous fiscal year, Company XYZ earned $10 per share. However, it’s important to note that this EPS calculation only provides a snapshot of the company’s financial performance during a single fiscal year.
By using EPS TTM, we can get a more accurate picture of Company XYZ’s financial performance over the past 12 months, rather than just a single fiscal year.
Takeaways
EPS TTM is an important financial metric that provides a more accurate picture of a company’s profitability over time than a single quarter or fiscal year. By using EPS TTM, investors and analysts can get a more reliable measure of a company’s financial performance and make more informed investment decisions.
It’s important to note that EPS TTM can be affected by factors such as stock options, warrants, and convertible securities, which can dilute the value of outstanding shares. Therefore, it’s important to consider other financial metrics in addition to EPS TTM to get a complete picture of a company’s financial performance.
EPS TTM is also useful for comparing the financial performance of different companies, as it provides a standardized measure of profitability on a per-share basis. However, it’s important to compare EPS TTM in the context of the industry and market conditions, as different industries and markets may have different norms and expectations for profitability.
Overall, EPS TTM is a valuable tool for investors and analysts to evaluate a company’s financial performance over time and make informed investment decisions.