Next Twelve Months (NTM)
Definition - What does Next Twelve Months (NTM) mean?
Divestopedia explains Next Twelve Months (NTM)
A company that experienced a tough year had TTM EBITDA of$10 million, but the NTM EBITDA is anticipated to rebound to $15 million. If the business is purchased for for $50 million, the EV / TTM EBITDA would be 5.0x, but the EV / NTM EBITDA is 3.3x. The buyer would likely use the EV/NTM EBITDA multiple of 3.3X, because the lower valuation multiple is easier to justify to the Board, bankers, and shareholders.
Knowing this information, mid-market business owners should prepare an adequate forecast of all key NTM financial metrics. If the seller can help a buyer justify a lower valuation multiple, while still getting the purchase price target, the probability and timing of closing the deal greatly improves.
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