Which of the following is a reason to invest based on NTM and LTM ratios?

Investing in companies with lower NTM (Next Twelve Months) ratios can indicate a potential for growth, which is a compelling reason to invest. The NTM ratios provide insights into a company's expected financial performance, specifically earnings before interest, taxes, depreciation, and amortization (EBITDA), over the upcoming year. A lower NTM ratio may suggest that the market has not yet fully recognized the company's growth potential or that it is undervalued relative to its future earnings expectations.

When a company's NTM ratio is low, it can indicate that the company is positioned well for future growth, especially if it operates in an expanding market or sector. This scenario sets up an opportunity for investors to take advantage of a price-to-earnings discrepancy as the company may experience an increase in its earnings, leading to a higher valuation over time. Furthermore, investors often look for such discrepancies as a strategic entry point into promising investments.

The analysis of LTM (Last Twelve Months) ratios is important, but when focusing on growth-oriented strategies, NTM ratios often provide a more forward-looking perspective, thereby highlighting investment opportunities where potential undervaluation exists.