Working with trailing 12-month numbers is very common for stock investors.
Remember that company’s report every quarter and hence new financial information is available every quarter. If we only work with fiscal year end numbers, we are letting go of new information. For example, by November or December, earnings reported for the last fiscal (ending March) are very stale.
Any financial metric (like ROE) or valuation metric (like P/E) will not be accurate and reliable if based on fiscal year numbers. A common work around for this is to use trailing 12-month numbers where we look at the past 4 quarters as a block of 1 year.
For example, trailing 12-month EPS will be the sum of EPS of past 4 quarters. The same can be applied to any flow-based item/metric (P&L and Cash flow).
Trailing 12-month calculation for ratios where both numerator and denominator are flow items (like EBITDA margin) is simply the ratio of their TTM numbers.
Trailing 12-month calculation for ratios where the denominator is a balance sheet item (like ROE) is slightly more involved. In this case, the TTM sum of the numerator is divided by the balance sheet item from the most recently available balance sheet date.
For example, the trailing 12-month ROE after reporting of the December 2022 quarter will be calculated as follows:
ROE (TTM) = (Net Income for quarters Dec 2022, Sep 2022, June 2022 and March 2022)/ Average(Total Equity as on Sep 2022, Total Equity as on Sep 2021)