The last twelve months is the basis most EBITDA multiples are quoted on. The formula is simple; the adjustments and the shortcuts around it are where value moves.
LTM EBITDA is the last full fiscal year, plus the current year to date, minus the same period of the prior year. With a 2025 EBITDA of 24.0 million, 19.5 million for the first nine months of 2026 and 17.2 million for the first nine months of 2025, LTM EBITDA to 30 September 2026 is 26.3 million, worth 236.7 million at 9.0 times. Annualising the third quarter would have said 29.6 million and added 29.7 million of enterprise value that the business has not earned.
Worked in full in Business Valuation by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
A fictional company with a December year end is being valued at the end of September 2026. Its EBITDA is seasonal, with the fourth quarter the strongest. On 1 July 2026 it bought a small competitor. All figures are illustrative, in millions.
| Quarter | 2025 | 2026 |
|---|---|---|
| Q1 | 5.0 | 5.6 |
| Q2 | 5.8 | 6.5 |
| Q3 | 6.4 | 7.4 |
| Q4 | 6.8 | |
| Full year / nine months | 24.0 | 19.5 |
Two further facts: the 2026 first half includes a 1.1 restructuring charge that will not recur, and the competitor bought on 1 July earned 1.0, 0.9 and 1.1 in the three quarters before it was acquired. The 7.4 reported for the third quarter of 2026 already includes its contribution since that date.
LTM = last fiscal year + current YTD − prior-year YTD
= 24.0 + 19.5 − 17.2 = 26.3
Check by quarters: Q4 2025 + Q1 to Q3 2026 = 6.8 + 5.6 + 6.5 + 7.4 = 26.3
Excel, with quarters in a row: =SUM(OFFSET(LastQ,0,-3,1,4)), or from the published figures =FY+YTD_cur-YTD_prior
The formula exists because most companies publish annual accounts and year-to-date interim figures, not standalone quarters. The two methods must agree; if they do not, one of the interim periods has been restated and the restated figure should be used on both sides.
Reported LTM is the starting point for a multiple, not the answer. Two adjustments are standard in a valuation or a sale process.
Non-recurring items: add back the 1.1 restructuring charge
Pro forma acquisitions: add the bolt-on's EBITDA for the LTM months before it was owned, 1.0 + 0.9 + 1.1 = 3.0, so that the LTM figure carries a full twelve months of it (3.0 before plus 1.2 since, 4.2 in all)
Adjusted LTM EBITDA = 26.3 + 1.1 + 3.0 = 30.4
The pro forma adjustment is legitimate only because the multiple is applied to the business as it now stands, acquisition included, and the price paid for the bolt-on sits in net debt. The add-back is legitimate only if the charge is truly one-off. A company that restructures every year has a recurring cost with an unhelpful label, and a buyer's quality of earnings work will treat it as such.
| Basis | EBITDA | Enterprise value | vs reported LTM |
|---|---|---|---|
| Last fiscal year, FY2025 | 24.0 | 216.0 | -20.7 |
| YTD annualised, 19.5 × 12 / 9 | 26.0 | 234.0 | -2.7 |
| LTM reported | 26.3 | 236.7 | 0.0 |
| Latest quarter × 4 | 29.6 | 266.4 | 29.7 |
| LTM adjusted | 30.4 | 273.6 | 36.9 |
The stale fiscal-year figure understates a growing business: LTM is 9.6 per cent above FY2025, which is 20.7 of value. The annualised YTD lands close to LTM here only by luck: it omits the strongest quarter of the year, Q4, which was 28.3 per cent of 2025 EBITDA against 20.8 per cent for Q1, and for a business with a different seasonal pattern it would miss by more. The adjusted LTM is 15.6 per cent above reported, which is why the adjustments, not the formula, are where a negotiation spends its time.
| Multiple | FY2025 | YTD annualised | LTM reported | Q3 × 4 | LTM adjusted |
|---|---|---|---|---|---|
| 8.0x | 192.0 | 208.0 | 210.4 | 236.8 | 243.2 |
| 9.0x | 216.0 | 234.0 | 236.7 | 266.4 | 273.6 |
| 10.0x | 240.0 | 260.0 | 263.0 | 296.0 | 304.0 |
A full turn of multiple is worth 26.3 on reported LTM. Choosing the quarter-times-four basis at 8.0x gives about the same value as LTM at 9.0x: the choice of EBITDA basis can be worth as much as a turn of multiple, and it gets far less scrutiny.
Multiplying the latest quarter by four. Q3 2026 is the best quarter yet, it includes the bolt-on, and it sits in the seasonal upswing; times four it gives 29.6, 3.3 above LTM and 29.7 of value at 9.0x. The second mistake is mixing bases: applying a multiple derived from peers' LTM EBITDA to a forward or run-rate figure for the subject company, or the reverse. A multiple only means something on the same basis it was measured on. Run-rate EBITDA, which takes the latest period and adds savings not yet in the numbers, is a different and more aggressive measure, covered in how to calculate run-rate EBITDA.
The book sets the comparable and transaction multiples against a DCF on the same company in the free workbook for this case; how a peer median is turned into a value is shown in how to value a private company with an EBITDA multiple.
None: last twelve months and trailing twelve months are the same measure, the sum of the four most recent quarters. In the illustrative case both give 26.3 million at 30 September 2026, the 6.8 of Q4 2025 plus 5.6, 6.5 and 7.4 for the first three quarters of 2026.
Because annualising assumes every quarter is alike. Nine months of 19.5 million annualised is 26.0 million, but it leaves out the fourth quarter, which carried 28.3 per cent of the previous year's EBITDA. LTM always contains one of each quarter, so seasonality cancels out.
Add the acquired business's EBITDA for the LTM months before completion, so the figure carries a full twelve months of it. A bolt-on bought on 1 July that earned 3.0 million in the three prior quarters adds 3.0 million, taking an LTM of 26.3 to 29.3 before other adjustments. The price paid must then be reflected in net debt.
This article is one calculation from Business Valuation. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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