An analyst is building a comparable company analysis and must choose between using LTM (last twelve months) and NTM (next twelve months) multiples. Which of the following statements is most accurate?

ALTM multiples are always preferred because they use actual reported results
BUse NTM when expected growth or profitability is changing materially✓ Correct answer
CNTM multiples should never be used because they rely on analyst estimates
DLTM and NTM multiples always produce the same valuation range

Explanation

Why B — Use NTM when expected growth or profitability is changing materially

NTM (forward) multiples are particularly useful when a company or its sector is undergoing a significant change in growth trajectory, margin profile, or business model. Since stock prices are forward-looking, NTM multiples often provide a better basis for comparison. However, they rely on consensus analyst estimates, which introduces forecast risk. Best practice is to present both LTM and NTM multiples to provide a comprehensive view, especially when there is a meaningful difference between historical and projected performance.

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