Year-Over-Year (YOY): What It Means, How It's Used in Finance

What Is Year-Over-Year (YOY)?

Year-over-year (YOY)—also written as year on year—is one of the most common financial comparisons, which allows comparing two or more measurable events annually. It shows that a company’s financial performance is getting better, worse, or standing still.

You may read from financial reports that, for example, a business said it posted better revenues in the third quarter on a YOY basis over the past three years.

KEY TAKEAWAYS

Year-over-year (YOY) is a method of evaluating two or more measured events to compare the results at one period with those of a comparable period on an annualized basis.
YOY comparisons are a popular and effective way to evaluate the financial performance of a company.
Investors seeking to gauge a company’s financial performance use YOY reporting.

Year-Over-Year (YOY) Understanding

Year-over-year refers to comparing a business over one period in time versus its numbers for the same period one year earlier. This is considered more informative than a month-to-month comparison, which often reflects seasonal trends.

Common YOY comparisons include annual and quarterly versus monthly performance.

Benefits of Year-Over-Year (YOY)

YOY measurements enable the sets of data to be cross-compared. If an investor or financial analyst has a company’s first-quarter YOY data, they will see as many years of revenue in that quarter, and the trend of the company’s rising or falling revenue will be easily identifiable.
Comparing the same months in different years will lead to accurate comparisons despite the seasonal nature of consumer behavior.

The YOY comparison is also valuable for investment portfolios. Investors like to look over YOY performance, basically looking at how performance changes over time.

Uses of Year-Over-Year (YOY)

Comparisons on a YOY basis prevail in the analysis of corporate performance because it reduces seasonality, given that most businesses are affected by this element. Sales, profits, and other financial metrics change during different periods of the year since most lines of business have peak and low-demand seasons.

For example, many retailers have the fourth quarter as the peak demand time due to holiday shopping. To better quantify the performance of a company, it then makes sense to compare revenues and profits YOY.

This would be important to compare only the fourth-quarter performance in one year to the fourth-quarter performance of other years. Say an investor is looking at a retailer’s results in the fourth quarter as opposed to the prior—third—quarter; it may look like a company is experiencing unprecedented growth when seasonality is driving the difference in results.
For example, comparing it to the following first quarter when moving from the fourth quarter, it would seem like a steep drop, which again can just be an effect of seasonality.
It also differs from the term sequential, which measures one quarter or month to the previous one and allows investors to see linear growth: for instance, the number of cell phones a tech company sold in the fourth quarter, compared to the third quarter, or the number of seats an airline filled in January, as opposed to December.

Example of Year-Over-Year (YOY)

Below is the consolidated income statement of Apple for Q2 2024. Total net sales have been $90.8 billion for the second quarter. In 2023, Apple had a record second-quarter net sales of $94.8 billion. That means Apple’s net sales are down 4.3% year over year in Q2 2024 compared to last year’s period. 1

The company recorded net income for Q2 2024 at $23.6 billion versus in 2023 when Apple made $24.2 billion. It represents an on-year decrease of 2.2%. 1 Apple Inc. “Condensed Consolidated Statements of Operations Q2 2024, Page 1.”.

What is YOY used for?

YOY stands for year-over-year, which involves the comparison of one period of time versus another period one year earlier. This allows annualization—for instance, comparing third-quarter earnings this year and third-quarter earnings of the previous year.

The measure is always used to compare a company’s growth in profits and revenues. It can also denote changes at yearly frequencies in an economy that reflect the money supply, gross domestic product, and other economic measures.

How Is YOY Calculated?

YOY calculations are very simplistic and almost always written in percentage form. This, of course, would mean one takes the current year’s value, dividing it by the prior year’s value and subtracting one: this year ÷ last year -1. You can then multiply this by 100 to get a percentage.

What is the difference between YOY and YTD?

YOY refers to a 12-month change. On the other hand, year-to-date has changed compared to the beginning of the year, usually January 1. YTD may present a running total, whereas YOY will offer a comparative point.

What if I am interested in comparisons of less than one year?

You can calculate month over month or quarter over quarter the same way you do YOY. In fact, you can select any time period of your choice.

The Bottom Line

Year-over-year (YOY) is a useful tool for financial analysts, corporations, and investors. It allows for the comparison of financial figures from one point in time to the same point a year prior.

It paints a clear picture of performance—whether performance is improving, worsening, or static. This shows the firm how its business runs and whether any adjustments are necessary.

It shows investors whether adjustments in their portfolio are required, while analysts use it to tell a company’s financial health and make future predictions.

FAQs

Q: What does year over year mean in finance?

Ans: In finance, “year over year” (YoY) refers to a comparison of a financial metric, such as revenue or profit, between the current year and the same period in the previous year. This allows for an analysis of the growth or decline of the metric over a 12-month period.[1][2][4]

Q: What is year over year abbreviation finance?
Ans: The abbreviation for “year over year” in finance is “YoY” or “YOY”.[1][2][3][4]

Q: What does yoy growth stand for?
Ans: YoY growth stands for “year-over-year growth”, which refers to the percentage change in a metric between the current year and the same period in the previous year.[1][2][3][4]

Q: What is year over year growth analysis?
Ans: Year-over-year growth analysis is the process of comparing a financial metric, such as revenue or profit, between the current year and the same period in the previous year. This allows for the identification of growth trends and patterns over a 12-month period.[1][2][4]

Q: How is yoy calculated?
Ans: To calculate YoY, the formula is: YoY = (Current Year Value / Previous Year Value) – 1. This gives the percentage change between the two periods.[2][3][4]

Q: What is a good yoy?
Ans: There is no single “good” YoY growth rate, as it depends on the industry, company, and specific metric being analyzed. However, generally, a YoY growth rate above 10-15% is considered strong, while a rate below 5% may be seen as weak.[2][3][4]

See also Four Digits To Memorize NYT

Q: What is an example of a yoy analysis?
Ans: An example of a YoY analysis would be comparing a company’s revenue in Q3 2022 ($38,050) to its revenue in Q3 2021 ($33,087). The YoY calculation would be: (38,050 / 33,087) – 1 = 15.0%, indicating a 15.0% increase in revenue year-over-year.[4]

Q: What are the benefits of year over year?
Ans: The key benefits of using year-over-year analysis include:
– Identifying growth trends and patterns over time
– Eliminating the impact of seasonality on performance
– Providing a clear picture of a company’s long-term growth trajectory
– Helping to set realistic expectations and goals for future performance
– Allowing for more informed business decisions and strategic planning.[1][2][4]

Q: How to calculate yoy growth for 3 years?
Ans: To calculate YoY growth for 3 years, you would need to compare each year’s value to the previous year:

Year 1 to Year 2 YoY growth = (Year 2 value / Year 1 value) – 1
Year 2 to Year 3 YoY growth = (Year 3 value / Year 2 value) – 1

This would give you the YoY growth rates for the 3-year period.[2]

Q: What is the year over year function?
Ans: There is no specific “year over year” function in Excel, but you can calculate YoY growth using a formula. The basic formula is:

=($B$2/$B$1)-1

Where $B$2 is the current year’s value and $B$1 is the previous year’s value. This will give you the YoY growth rate as a decimal that can be formatted as a percentage.[2][3]

Q: How to calculate yoy in Excel?
Ans: To calculate YoY in Excel, you can use the following formula:

=($B$2/$B$1)-1

Where:
– $B$2 is the current year’s value
– $B$1 is the previous year’s value

This will give you the YoY growth rate as a decimal that can be formatted as a percentage.[2][3]

Q: What is the year over year growth chart?
Ans: A year-over-year growth chart is a visual representation of the percentage change in a metric, such as revenue or profit, between the current year and the previous year. It allows for easy identification of growth trends over time. The chart typically displays the YoY growth rate for each period, often on a line graph or bar chart format.[2]

Q: What is the difference between mom and yoy?
Ans: The key difference between month-over-month (MoM) and year-over-year (YoY) is the time period being compared:

MoM compares the current month’s value to the previous month’s value.
YoY compares the current year’s value to the same period (month, quarter, etc.) in the previous year.

MoM provides more granular, short-term insights, while YoY smooths out seasonal variations and gives a longer-term perspective on performance trends.[3][4]

Q: How to analyse revenue growth?
Ans: To analyze revenue growth, you can use the following steps:

1. Calculate the year-over-year (YoY) revenue growth rate using the formula: (Current Year Revenue / Previous Year Revenue) – 1
2. Analyze the trend in YoY revenue growth over multiple periods to identify patterns and growth trajectories.
3. Compare the company’s revenue growth to industry benchmarks or competitors to assess relative performance.
4. Investigate the drivers behind the revenue growth, such as new product launches, market expansion, or pricing changes.
5. Assess how the revenue growth aligns with the company’s overall strategic objectives and financial goals.[4]

Q: What is good year-over-year growth?
Ans: There is no single definition of “good” year-over-year (YoY) growth, as it can vary depending on the industry, company, and specific metric being analyzed. However, some general guidelines:

– YoY growth above 10-15% is often considered strong
– YoY growth between 5-10% may be seen as moderate
– YoY growth below 5% could be viewed as weak

The “good” level of YoY growth also depends on the company’s historical performance, future goals, and competitive landscape. Consistent, sustainable growth is generally more desirable than volatile, short-term spikes.[3][4]

Q: Why is the growth rate important?
Ans: The growth rate, such as year-over-year (YoY) growth, is important for several reasons:

1. It indicates a company’s ability to expand its business and increase revenue, profits, or other key metrics over time.
2. Consistent, strong growth rates can signal a healthy, thriving company that is gaining market share and executing its strategy effectively.
3. Growth rates provide valuable context for evaluating a company’s financial performance and allow for comparisons to industry peers or historical trends.
4. High growth rates can attract investors and lead to increases in a company’s stock price or valuation.
5. Growth rates inform business planning, budgeting, and strategic decision-making for the company’s future.

Overall, the growth rate is a critical metric for assessing a company’s financial health, competitiveness, and long-term prospects.[4]

Q: What is the YoY formula?
Ans: The formula for calculating year-over-year (YoY) growth is:

YoY = (Current Year Value / Previous Year Value) – 1

This gives the percentage change between the two periods. For example, if revenue was $100 last year and $110 this year, the YoY formula would be:

YoY Revenue Growth = ($110 / $100) – 1 = 0.10 or 10%

So the year-over-year revenue growth is 10%.[3][4]

Q: What does YoY mean?
Ans: YoY stands for “year-over-year”. It is a financial metric used to compare a value, such as revenue or profit, between the current year and the same period in the previous year. YoY analysis provides insights into a company’s growth trends and performance over a 12-month period.[2][3][4]

Q: What is the meaning of year on year growth?
Ans: Year-on-year (YoY) growth refers to the percentage change in a metric, such as revenue or profit, between the current year and the same period in the previous year. It allows for an analysis of a company’s performance and growth trends over a 12-month period, while accounting for seasonality and other factors.[2][3][4]

Q: How to do a YoY analysis?
Ans: To perform a year-over-year (YoY) analysis, follow these steps:

1. Identify the metric you want to analyze (e.g. revenue, profit, customer count, etc.)
2. Obtain the value for the current year and the previous year
3. Calculate the YoY growth rate using the formula:
YoY = (Current Year Value / Previous Year Value) – 1
4. Express the YoY growth rate as a percentage
5. Analyze the YoY growth rate to identify trends, patterns, and performance changes over the 12-month period
6. Compare the YoY growth to industry benchmarks, competitors, or the company’s own historical performance

This process allows you to evaluate the company’s growth and financial health in a meaningful, year-over-year context.[3][4]

Q: How to calculate growth rate?
Ans: To calculate the growth rate, you can use the following formula:

Growth Rate = (Current Value – Previous Value) / Previous Value

This will give you the percentage change between the two periods. For example, if revenue was $100 last year and $110 this year, the growth rate would be:

The key aspects of the YoY effect include:

– Smoothing out seasonal variations: YoY comparisons help eliminate the impact of seasonality on a company’s results, providing a clearer picture of underlying trends.
– Identifying long-term growth patterns: YoY analysis allows for the detection of sustained growth or decline over a 12-month period, rather than just short-term fluctuations.
– Providing context for performance: YoY comparisons give stakeholders a better understanding of a company’s progress and trajectory compared to the prior year.
– Enabling benchmarking: YoY growth rates can be compared to industry averages, competitors, or the company’s own historical performance.

Overall, the YoY effect helps analysts and decision-makers gain meaningful insights into a company’s financial health and growth potential.[5]

Q: What is the difference between Yoy and MoM?
Ans: The key difference between year-over-year (YoY) and month-over-month (MoM) is the time period being compared:

YoY compares the current year’s value to the same period (month, quarter, etc.) in the previous year.
MoM compares the current month’s value to the previous month’s value.

YoY analysis provides a longer-term perspective on performance trends and growth, while smoothing out seasonal variations. MoM analysis offers a more granular, short-term view of changes, but can be more volatile due to seasonality and other factors.[3][4][5]

Q: How to evaluate the financial performance of a company?
Ans: To evaluate the financial performance of a company, you can use the following steps:

1. Analyze the company’s financial statements (income statement, balance sheet, cash flow statement)
2. Calculate and examine key financial ratios, such as:
– Profitability ratios (e.g. profit margin, return on equity)
– Liquidity ratios (e.g. current ratio, quick ratio)
– Leverage ratios (e.g. debt-to-equity, interest coverage)
– Efficiency ratios (e.g. asset turnover, inventory turnover)
3. Assess the company’s revenue and earnings growth, using year-over-year (YoY) analysis
4. Evaluate the company’s cash flow generation and working capital management
5. Compare the company’s financial performance to industry benchmarks and competitors
6. Analyze trends in the company’s financial metrics over multiple years
7. Consider non-financial factors, such as market share, customer satisfaction, and competitive positioning
8. Assess the company’s future growth prospects and strategic initiatives

By taking a comprehensive approach and analyzing both quantitative and qualitative factors, you can gain a well-rounded understanding of a company’s financial health and performance.[5]

Q: What is a good yoy growth rate?
Ans: There is no single definition of a “good” year-over-year (YoY) growth rate, as it can vary depending on the industry, company, and specific metric being analyzed. However, some general guidelines:

– YoY growth above 10-15% is often considered strong
– YoY growth between 5-10% may be seen as moderate
– YoY growth below 5% could be viewed as weak

Ultimately, the appropriate YoY growth rate will depend on the context and expectations for the particular company or industry. The key is to analyze the YoY growth trend over time and compare it to relevant benchmarks.[3][4]

Q: What is MoM in finance?
Ans: MoM in finance stands for “month-over-month”. It refers to a comparison of a financial metric, such as revenue or profit, between the current month and the previous month. MoM analysis provides a more granular, short-term view of changes in a company’s performance, in contrast to the longer-term, year-over-year (YoY) analysis.[3][4][5]

Q: What is the base effect of the year-over-year?
Ans: The base effect in year-over-year (YoY) analysis refers to the impact that the previous year’s value has on the current year’s YoY growth rate.

If the previous year’s value was unusually low or high, it can skew the YoY growth rate in the current year, making it appear higher or lower than the actual underlying performance.

The Breaker Times