Year-Over-Year YoY: Complete Guide + Examples

It’s a term you’ll hear frequently when considering investment returns because it allows you to look at changes in annual performance from one year to the next. This information will allow you to gain insights into how your finances are performing. It will allow you to determine if they’re getting better, staying the same, or getting worse. To find the comparison over time, you compare the data from a specific year against the year prior.

1. Overall, YOY comparisons provide valuable insights into the trends and changes that have occurred over a specific period, helping businesses and individuals make informed decisions based on historical data.
2. When the result is positive it means your business experienced growth.
3. This type of calculation doesn’t account for any events that aren’t built-in to a yearly calendar.
4. YoY measures the rate of change between two variables over two different years.
5. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets.
6. Calculating YoY metrics is sometimes called “annualizing,” and it’s one of the best ways to develop a longer-term understanding of your business’s performance.

As important as YoY comparisons can be, they really aren’t enough to gauge a long-term investment plan. When the result is positive https://traderoom.info/ it means your business experienced growth. On the flip side, if the result is negative then you’ve experienced a loss.

It allows businesses to track progress over the course of the year. Investors often consider a combination of factors when evaluating YOY growth, including the company’s industry benchmarks, historical performance, market conditions, and future growth prospects. What’s most important is that the YOY growth aligns with the company’s objectives, strategies, and overall business plan. The assessment of what constitutes a “good” Year-over-Year (YOY) growth rate can vary significantly based on the industry, the size of the company, the stage of the business, and the economic conditions. There is no one-size-fits-all answer, as what might be considered exceptional growth in one industry could be relatively modest in another.

What is YOY?

YoY takes this into account making it easy to compare actual growth. Additionally, since the metric for YoY is calculated as a percentage, it makes it easy to compare to competitors in the same industry even if the companies are completely different sizes. The holiday season is critical for retailers, with many businesses basing an entire year’s success on their fourth quarter. Retail giant Macy’s relies on holiday purchases to increase its sales numbers each year. By looking at Macy’s Q3 vs Q4 earnings in 2020, it seems as if the company performed well since there was an increase in reported revenue.

How to calculate YoY

Year-over-year calculations are frequently used when discussing economic or financial data. Viewing year-over-year data allows you to see how a particular variable grows or falls over an entire year rather than just weekly or monthly. MOM (month-over-month) statistics are usually not a realistic representation of any company’s performance. The businesses that have peak seasons can show huge losses in MOM or even quarterly comparisons. But, comparing your business to the same time last year will show you all the important information.

Why is year-over-year growth important to small businesses?

It gives a more accurate view of whether the numbers are growing or declining. Let’s say your company wants to calculate its year-over-year revenue growth for the month of January. We’ll also assume that the business earned $50,000 in revenue this January while it earned $40,000 in the same month last year. However, in most cases, Year-Over-Year is used to measure financial performance for a particular year, quarter, or month. Here we’ll go over how exactly you should calculate year-over-year growth, why it’s so important for business owners to do so, and why year-over-year calculations are indispensable in a startup owner’s toolbox.

Now that we have uncovered the pros and cons of YOY, you might wonder – what is good YOY growth? Well, you won’t find one universally accepted answer, because it doesn’t exist. It depends on the type of business, the market, and also your goals.

The most successful investors have a long-term plan for investing—and it’s important to think long-term about the performance of your investments. Then you’ll have a better idea of what you can expect from that investment in the future. You can do YoY calculations for revenue, profit, users acquired, website traffic—you name it. What review broker binary.com you measure with the YoY growth formula is up to you, so long as you have data reaching back at least 12 months. For instance, let’s say a company’s net profit was $155,000 in Q2 of 2018, then increased to $182,000 in Q2 of 2019. To determine the year-over-year percentage change, subtract $182,000 by $155,000, which equals $27,000.

YoY (Year-Over-Year)

It lets you know what things you should keep up with and helps point out the mistakes you should stop making. QOQ analysis compares data for the same quarter in different years. It provides a more frequent snapshot of changes and can be useful for businesses with significant seasonal variations or for assessing short-term trends.

Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications. Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. This example comes from a financial modeling exercise where an analyst is comparing the number of units sold in Q to the number of units sold in Q3 2017. For example, suppose the net operating income (NOI) of a commercial real estate property investment has grown from $25 million in Year 0 to $30 million in Year 1. If by April you have figures of $55,450 for January, $87,690 for February, $50,460 for March, and $40,600 so far in April, your YTD results will be the sum of these revenues.

YOY is frequently used in financial analysis and data analytics to compare time series data in the world of business, finance and economics. Some businesses experience peak and low seasons, so comparing month-to-month or quarter-to-quarter metrics might not be helpful. In your first year in business, this busy day made it extremely difficult to benchmark or compare your performance because July the 4th was such an outlier.

If a company reported a 35% increase in revenue in December, the data would provide less insight than a report showing that revenue increased 20% in the most recent December to December period. The latter period is a year-over-year measure that indicates revenue is growing on a yearly basis rather than just for the holiday season. Year-over-year (YOY) is a calculation that compares data from one time period to the year prior.