If you have ever tried to value a business using market comparables, you know how overwhelming it can feel.
You hear people talk about EV to EBITDA multiples, revenue multiples, or price to earnings multiples, and somewhere in the conversation, someone throws in “LTM” or “NTM” as if you are supposed to know what that means automatically.
The truth is, many founders, operators, and even some investors get confused between LTM and NTM.
Yet these two concepts are some of the most important pieces of any market-based valuation.
You see LTM and NTM everywhere in investment banking reports, equity research, private equity presentations, and startup fundraising decks.
LTM stands for Last Twelve Months, which refers to a company’s actual financial performance over the most recent twelve months.
Meanwhile, NTM stands for Next Twelve Months, which represents the company’s projected performance for the next year.
Understanding the difference between these two helps you understand how buyers think about risk, growth, valuation expectations, and pricing.
Why should you care? Because choosing LTM or NTM completely changes a company’s valuation.
A fast-growing company usually looks much more valuable on an NTM basis, while a mature or stable business tends to be valued using LTM. If you rely on the wrong metric, you may overvalue the company, undervalue it, or misunderstand the market entirely.
In this guide, you will learn what valuation multiples are, how LTM and NTM are calculated, why they matter, how investors use them, and what adjustments you need to make to ensure the numbers are accurate.
What Are Valuation Multiples?
Before you dive into LTM and NTM, it helps to understand what valuation multiples actually represent.
Multiples are tools that let you compare the value of one company to another, even when those companies are different sizes or operate in different markets.
Investors use them because they offer a quick way to understand how much a business is worth relative to its revenue, profit, or cash flow.
A valuation multiple is usually expressed as a ratio.
For example, if a company has a $100 million enterprise value and earns $20 million in EBITDA, its EV to EBITDA multiple is 5x.
Investors often rely on these comparisons because they are easier to understand than long, detailed models. They also help you see whether a business is trading above or below industry averages.
You can find industry multiples referenced in databases like Kroll’s Cost of Capital resources and Damodaran’s valuation datasets.
Economic conditions also shape multiples.
When interest rates rise, company valuations often fall because discount rates increase. Federal Reserve interest rate data helps analysts understand how the cost of capital may influence valuation multiples.
Understanding these basics sets the stage for LTM and NTM.
Once you know why multiples matter, you can better understand how past results and future expectations shape different valuation outcomes.
EV vs Equity Value — Why Matching Matters
One of the most important rules in valuation is matching the correct numerator with the correct denominator.
Enterprise Value (EV) should be paired with metrics that represent all capital providers, such as:
- EBITDA
- Revenue
- EBIT
- Free cash flow to the firm
Equity Value should be paired with equity-only metrics:
- Net income
- EPS
- Free cash flow to equity
Using EV with net income or using Equity Value with EBITDA will produce distorted multiples and misleading conclusions.
This matching principle is standard across investment banking, private equity, and equity research.
What Is LTM (Last Twelve Months)?
LTM stands for Last Twelve Months, and it refers to a company’s actual financial performance over the most recent twelve months.
Instead of relying only on a company’s last full fiscal year, LTM financials update the numbers to reflect the most current operational reality.
This makes LTM useful for investors who want the most accurate, up-to-date picture of how a business is performing right now.
LTM figures are typically created by taking the latest annual results and replacing older months with the most recent months from interim financial statements.
For example, if a company just released its third-quarter results, analysts would create an LTM period by adding Q1, Q2, Q3 of the current year, and Q4 of the previous year. This method helps you get around seasonal swings and outdated financials.
Regulatory reporting practices from the U.S. Securities and Exchange Commission (SEC) outline how companies publish quarterly and annual results, which analysts use to build LTM data.
The biggest advantage of LTM is that it is grounded in real, historical performance. When you use LTM results, you are not guessing or forecasting. Instead, you are using actual revenue, profit, and cash flow that the business has already generated.
This makes LTM especially valuable for industries with consistent performance, such as manufacturing or professional services.
Of course, LTM is not perfect. It does not capture upcoming changes, such as a new product launch, new contracts, cost cuts, or a shift in market demand. It also does not reflect upcoming risks that may affect future revenue or profit.
How to Build LTM From Quarterly or YTD Results (Step-by-Step)
Professional analysts often construct LTM manually. Here is how:
Step 1 — Start with the most recent full-year results.
Example: FY2023 Revenue = $80M.
Step 2 — Replace the earliest quarters with the new quarters.
If Q1, Q2, and Q3 2024 have been released:
LTM Revenue =
Q1 2024 + Q2 2024 + Q3 2024 + Q4 2023
Step 3 — Adjust for seasonality if needed.
Retail, agriculture, and hospitality require smoothing.
Step 4 — Ensure GAAP consistency.
Mixing GAAP and non-GAAP results leads to incorrect multiples.
This step-by-step construction is standard in valuation analyses across M&A and equity research.
What Is NTM (Next Twelve Months)?
NTM stands for Next Twelve Months, and it represents what a company is expected to earn over the upcoming year.
Unlike LTM, which looks backward at what actually happened, NTM looks forward. It reflects forecasts, budgets, market trends, and analyst expectations. If you want to understand how a business might perform in the future, NTM gives you a way to quantify that.
To build NTM financials, analysts typically combine a company’s internal forecasts with broader market expectations.
Public companies often have published analyst projections available through platforms like Yahoo Finance and and Google Finance.
These platforms aggregate expected revenue and earnings from Wall Street analysts, giving investors a view of consensus estimates.
One of the biggest advantages of NTM is that it captures expected growth. If a company is scaling quickly, expanding into new markets, or launching new products, NTM reflects those gains.
That is why high-growth industries like technology and SaaS are often valued using NTM multiples.
Of course, NTM comes with risk. Forecasts can be too optimistic or based on assumptions that change quickly. Unexpected economic shifts, competition, customer churn, or supply chain issues can make projections inaccurate.
This is why valuation analysts often run sensitivity scenarios to understand how changes in revenue growth or margins could affect the NTM valuation.
How to Build Reliable NTM Forecasts (Professional Methods)
Analysts use several techniques to forecast NTM:
1. Top-down projections
Use industry growth rates from Statista, IBISWorld, or government data.
2. Bottom-up forecasting
- Build estimates based on:
- customer pipeline
- churn assumptions
- expansion revenue
- unit economics
3. Management guidance reconciliation
Compare internal forecasts with historical accuracy to avoid optimistic bias.
4. Analyst consensus estimates
For public companies, this is considered the most objective.
5. Sensitivity testing
Run best-case, base-case, and worst-case scenarios.
This makes NTM more defendable in professional valuations.
LTM vs. NTM: Key Differences
LTM and NTM may look similar on the surface, but they serve very different purposes in valuation.
One looks at what has already happened. The other looks at what you expect to happen.
Understanding the differences helps you decide which one is right for your valuation scenario and why investors switch between them depending on growth, stability, and market conditions.
1. Time Orientation
LTM is backward-looking. It captures the most recent twelve months of real financial performance. That means it reflects actual revenue, expenses, and profits.
This makes LTM a grounded, reliable data point.
NTM is forward-looking. It captures what analysts or the company believe will happen in the next twelve months. Forecasting relies on assumptions about growth, demand, margins, and economic trends.
Many forecasts incorporate macroeconomic indicators from sources such as the Federal Reserve Economic Data (FRED) and and industry outlooks from Statista.
2. Data Source
LTM uses actual historical financial statements.
These often come from audited reports or quarterly filings, which are published under guidelines set by the U.S. Securities and Exchange Commission (SEC) NTM uses projected financials.
Public company forecasts often come from equity analysts and can be found on platforms like Yahoo Finance and Google Finance.
Private company projections come from internal budgets, pipeline estimates, and market research.
3. Use Cases
LTM is best when:
- The business is stable
- Historical performance reflects future expectations
- You want to compare against confirmed financials
- You are valuing a mature company or SMB
NTM is best when:
- The company is growing quickly
- Future earnings are expected to be much higher
- Investors want forward-looking insight
- You are valuing tech, SaaS, or high-growth firms
Investors in private equity often use both, while venture capital groups rely more heavily on NTM due to growth expectations.
4. Risk and Reliability
LTM is more reliable because it reflects actual results. There is no guesswork or forecasting error involved.
NTM is less reliable because projections can be wrong.
For example, analyst earnings forecasts often shift when new information becomes available, which is documented in earnings revision data on Refinitiv and and broad market studies from Morningstar.
Because of this, valuers sometimes apply risk adjustments or run scenario analyses to avoid overestimating NTM performance.
5. Sensitivity to Changes
LTM changes gradually because each new quarter replaces an older quarter. The volatility is fairly low.
NTM can change overnight. One press release, economic announcement, supply chain issue, or leadership decision can dramatically influence next year’s expectations.
This is why NTM is often described as more sensitive to market news, which you can see reflected instantly in forward P/E ratios on Yahoo Finance.
6. Impact on Valuation
In many industries, NTM multiples are higher than LTM multiples because they capture expected growth.
If revenue is expected to rise significantly, using NTM reduces the multiple and makes the company appear cheaper relative to its future earnings.
Example:
- EV/LTM EBITDA = 12x
- EV/NTM EBITDA = 8x
This is common in high-growth sectors such as software. Industry multiple comparisons appear frequently in forums like Damodaran’s data center and and Kroll’s cost of capital insights.
Popular Multiples and Whether They Use LTM or NTM
| Multiple | Usually LTM | Usually NTM | Notes |
|---|---|---|---|
| EV/Revenue | Yes | Yes | SaaS and tech often use NTM. |
| EV/EBITDA | Yes | Yes | PE firms use both. |
| P/E | Yes | Yes | Equity markets heavily use forward P/E. |
| EV/EBIT | Yes | Sometimes | Depends on industry stability. |
Adjustments Needed for LTM and NTM Calculations
Before you use LTM or NTM multiples in a valuation, you need to make sure the numbers are accurate and comparable.
Raw financials often include unusual events, owner expenses, or timing issues that can distort the true performance of a business. This is why analysts “normalize” financials. These adjustments help create a consistent, fair, and realistic baseline for comparing companies.
Guidance on these adjustments is widely discussed in valuation resources from the AICPA and in industry benchmarking studies by RMA Annual Statement Studies.
Let’s break down the most common adjustments.
1. Normalizing EBITDA
EBITDA is one of the most widely used metrics in valuation, but it often needs adjustments to reflect what the business would look like under normal conditions.
Some common adjustments include:
- Owner Compensation: Small business owners often take salaries that are either above or below market norms. Adjusting to market-rate compensation helps you understand the true operating cost.
- One-Time Expenses: This includes legal fees for a lawsuit, one-time consulting projects, moving or relocation costs, and severance packages. These expenses do not occur every year, so analysts remove them.
- Non-Operating Income or Expenses:These might include gains from selling assets, investment income, and one-off government grants. These are removed because they do not reflect normal operations.
Normalizing EBITDA ensures both LTM and NTM reflect the company’s true earning power.
2. Working Capital Adjustments
Working capital can change significantly from one period to the next, especially in businesses with inventory or long receivable cycles.
For LTM analysis, analysts often review average working capital levels to avoid distortions caused by seasonal swings.
For NTM, working capital forecasts rely on industry averages or historical patterns.
Working capital adjustments ensure valuation multiples reflect the proper amount of capital needed to support operations.
3. Seasonal Adjustments
Some industries have predictable seasonal patterns.
Retail companies experience holiday spikes, construction companies slow down in winter months, and agriculture businesses depend heavily on harvest seasons.
If you measure LTM right after a weak quarter or strong quarter, without adjusting for seasonality, valuation results may be misleading.
To correct this, analysts often replace anomalous quarters with historical seasonal averages or adjust the weighting of peak periods.
4. Forecast Adjustments
Since NTM relies on projections, forecast quality matters. In some cases, management forecasts are too optimistic.
Analysts often adjust forecasts by reviewing:
- Historical forecasting accuracy
- Industry growth rates
- Market outlooks from the Federal Reserve
- Economic indicators from the World Bank
Forecast adjustments help ensure NTM is not inflated beyond reasonable expectations.
5. GAAP vs. Non-GAAP
- Adjusted EBITDA
- Adjusted revenue
- Pro forma margins
Non-GAAP figures often exclude stock-based compensation, acquisition costs, and restructuring expenses. When using LTM or NTM multiples, analysts must ensure they are comparing GAAP to GAAP or non-GAAP to non-GAAP.
Mixing the two creates distorted valuations.
Clear consistency across periods ensures both LTM and NTM results are meaningful.
Scenario & Sensitivity Testing for NTM Multiples
Because NTM relies on assumptions, analysts run sensitivity tables.
Example:
| Scenario | NTM EBITDA | EV/NTM Multiple |
|---|---|---|
| Bear | $18M | 10x |
| Base | $20M | 9x |
| Bull | $24M | 7.5x |
This is standard in valuation models used by investment banks and PE firms.
How Investors Use LTM and NTM in Real Valuations
Once you understand what LTM and NTM represent, the next step is understanding how different types of investors use them.
Not every buyer values a business the same way. Some prefer the certainty of historical numbers, while others focus almost entirely on where the business is heading next year.
The method an investor chooses is shaped by strategy, risk tolerance, industry expectations, and the company’s stage of growth.
Let’s look at how different investor groups apply LTM and NTM multiples in practice.
Investment Bankers
Investment bankers often use both LTM and NTM, depending on the industry and deal size.
In M&A transactions involving mature companies, bankers rely heavily on LTM because it reflects stable, proven results.
For high-growth businesses, bankers lean toward NTM because forward-looking earnings better reflect likely deal pricing.
Private Equity Firms
Private equity firms take a balanced approach. They review LTM to understand the company’s current performance but rely on NTM to estimate returns over their investment horizon.
They also stress-test forecasts using macroeconomic data from Federal Reserve Economic Data (FRED) and and historical recession data from the National Bureau of Economic Research (NBER).
If NTM projections appear too optimistic, PE firms adjust them downward or apply a higher discount rate to account for risk.
Venture Capital Investors
Venture capital firms rely almost entirely on NTM.
Startups often have limited historical performance, and what matters most is growth potential. Because revenue and EBITDA may still be negative, VC firms typically use revenue multiples based on expected future growth.
Forward multiples and projected KPIs are evaluated against industry benchmarks often cited in data sets from Statista and Crunchbase.
VCs know forecasts are risky, but fast scaling is what drives valuation in early stages.
Strategic Acquirers
Strategic buyers such as larger corporations look at both LTM and NTM, but NTM tends to carry more weight.
They care about:
- Future synergies
- Cross-selling opportunities
- Cost savings
- Market expansion
Because these benefits show up in future earnings, strategic acquirers often emphasize NTM EBITDA when determining a deal price.
Complete Example — LTM vs NTM Multiple Calculation
Suppose:
- Enterprise Value: $240M
- LTM EBITDA: $20M
- NTM EBITDA: $30M
LTM Multiple
EV / LTM EBITDA = 240 / 20 = 12x
NTM Multiple
EV / NTM EBITDA = 240 / 30 = 8x
This shows why fast-growing companies often appear cheaper on an NTM basis.
Final Thoughts
Understanding the difference between LTM and NTM valuation multiples gives you a huge advantage when evaluating any business.
Once you see how these metrics work, you can understand how investors look at performance, growth, and risk.
LTM helps you understand what the company has already accomplished based on factual, historical results. NTM helps you understand where the company is headed and how much investors believe it will grow in the near future.
Both metrics have value, and both can paint very different pictures depending on the business.
Choosing the right metric is not just about picking past or future data. It is about selecting the metric that truly represents the company’s risk, growth stage, and long-term potential.
If you choose the wrong approach, you could end up overvaluing or undervaluing the business.
That is why valuations are rarely one-size-fits-all and why experienced financial professionals always consider context, comparables, and market conditions supported by objective data sources like Kroll, FRED, and IBISWorld.
If you want expert guidance on which multiples to use and how to apply LTM and NTM correctly, Virtue CPAs can help.
Our team specializes in business valuation, financial modeling, and strategic planning. We can walk you through your financials, help normalize your numbers, compare you against industry benchmarks, and determine how to value your company using the right methods.
If you would like help understanding your valuation, choosing the right multiple, or preparing for a sale or investor discussion, contact Virtue CPAs for a personalized consultation.
Frequently Asked Questions
Jeet Chaudhary
Jeet Chaudhary serves as the Chief Operating Officer at Virtue CPAs, where he leads the firm’s Global Control Centre and oversees end-to-end operational excellence.
