How do you evaluate/value when TTM pops significantly?

September 19, 2025

by a searcher from New Mexico State University in Albuquerque, NM, USA

I have noticed a trend, it seems all companies see significant rises in TTM revenue, doubling EBITDA percentage, etc. Clearly they are getting ready for a sale and perhaps putting off necessary expenses, or overcommitting themselves, or playing games with rev rec, etc. Wondering what experienced buyers do with their back of the napkin math before deeper DD? (besides the obvious: ignore the projections...40% EBITDA for the next 5 years, lol ;) ) Is it just a simple intuition on how to weight the past? (e.g. 40% TTM, 30% y-1, 20% y-2, 10% y-3)?

Reply by a lender
from California State University, Sacramento in Seattle, WA, USA

Gotta start with the story. And then go from there as to plausibility of sustainability.

Reply by a searcher
from University of Washington in Seattle, WA, USA

I don't think you can do any serious analysis on this company until you understand what drove the bump. I stayed away from companies that showed this kind of growth. If the company meets "standard" ETA criteria, it wouldn't accelerate like this because they should a steady business. But your priorities may differ. I'd check to see if that pandemic had an impact and if this is a return to normal or if the pandemic caused the acceleration. I'd be very skeptical if the seller is telling you this is the new normal. In either case, you're looking at a company that is more variable than something you'd want to put a lot of debt on. If there is a list price, you can look at multiple scenarios to make sure your can pay back the loan if the company returns to 2022/2023 EBITDA levels based on the purchase price or whatever you think you can negotiate it down to.

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