Using Last Twelve Months $($LTM$)$ EBITDA

The EV$/$EBITDA metric is commonly used in relative valuation analysis. This metric compares the value of the enterprise on the numerator to its profitability on the denominator. However, the profitability in the denominator must be measured over a specified period of time. That period needs to be consistent across all the companies that are being measured.

Why is the last twelve months $($LTM$)$ EBITDA used in valuation metrics like EV$/$EBITDA$?$

To remove the cyclicality from the calculation.

To align the EBITDA timing with the enterprise value calculation.

To use numbers that are certain and audited.

To estimate future earnings potential.