Year-Over-Year YOY: What It Means, How It’s Used in Finance

Year-over-year (YOY)—sometimes referred to as year-on-year—is a frequently used financial comparison for looking at two or more measurable events on an annualized basis. Observing YOY performance allows for gauging if a company’s financial performance is improving, static, or worsening. For example, you may read in financial reports that a particular business reported that its revenues increased for the third quarter on a YOY basis for the last three years. YoY stands for Year over Year and is a type of financial analysis that’s useful when comparing time series data.

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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. Similarly, in a comparison of the fourth quarter with the following first quarter, there might appear to be a dramatic decline, when this could also be a result of seasonality. For information pertaining to the registration status of 11 Financial, please contact the state securities regulators for those states in which 11 Financial maintains a registration filing.

Net income, revenue, and sales are frequently quoted as a year-over-year measure and can be found on a company’s annual and quarterly financial statements. YOY is frequently used in financial analysis and data analytics to compare time series data in the world of business, finance and economics. Unlike standalone quarterly/monthly/weekly metrics, YOY gives you a clearer picture of performance without seasonal effects, monthly volatility, and other factors. Once we perform the same process for revenue in all forecasted periods, as well as for EBIT, the next part of our modeling exercise is to calculate the YoY growth rate.

Revenue Growth Rate Assumptions

The year over year percentage change is the figure by which year over year growth is measured. Investors often put great emphasis in a company’s Yoy growth when deciding whether to invest in that company because it is one of the clearest measures of a company’s performance over time. The year-over-year format is a crucial tool to evaluate the direction in which a company’s financial performance is trending. For example, the key difference between YOY and YTD is that YTD helps calculate growth from the beginning of the year, calendar or fiscal, until the present date.

For a company’s first-quarter revenue using YOY data, a financial analyst or an investor can compare years of first-quarter revenue data and quickly ascertain whether a company’s revenue is increasing or decreasing. For example, seasonality (how certain seasons affect revenues) is not accounted for in a YoY analysis. Businesses located in holiday destinations such as ski resorts, hotels, and restaurants suffer from high seasonality, which should be accounted for in financial reports. Knowing this information can lead to significant cost savings by shutting down operations in the off-season. For instance, rather than use the raw numbers to Volatilidad show how much a company’s net profit has increased between Q and Q1 2020, a year over year percentage change is expressed by saying that profit has increased by 18%.

But, comparing your business to the same time last year will show you all the important information. It lets you know what things you should keep up with and helps point out the mistakes you should stop making. During evaluation, investors will typically look at the YOY change in financial metrics. Some of them, such as liquidity and operating cash flow, are best followed through the YOY method, so the investors can determine how stable the business is.

How to Calculate YoY Growth

Overall, the company sold 7% more units in Week #31 of year 2021 than the previous year. Get instant access to video lessons taught by experienced investment bankers. Learn financial statement modeling, DCF, M&A, LBO, Comps and Excel shortcuts. The formula to calculate Year-over-Year (YoY) is the current year’s value learn trading with online courses and classes 2021 divided by the previous year’s value minus one. Now, an analyst can take that data and say that this company increased its bottom line by 17.4% between 2018 and 2019.

1. For most businesses, that means using YOY to compare their revenue growth.
2. You should also make YoY comparisons from the current year to two years ago, three years ago, five years ago.
3. In other words, revenue increased by $10 million compared to the previous year, which amounts to a 10% YoY revenue growth.
4. It measures a company’s annualized data between two identical periods of time from back-to-back years, specifically looking at how that data has changed.
5. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications.

Year-Over-Year is a way of looking at multiple annualized sets of a company’s financial data from separate years to see how that data has changed. Economic indicators help experts track market changes and even economies of countries. Some of the most important ones are the GDP (gross domestic product), employment indicators, and CPI (consumer price index). When dealing with them, it’s best to analyze the data using the YOY approach.

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. The formula used to calculate the year over year (YoY) growth divides the current period value by the prior period value, and then subtracts by one. A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation. Finance Strategists has an advertising relationship with some of the companies included on this website. We may earn a commission when you click on a link or make a purchase through the links on our site. All of our content is based on objective analysis, and the opinions are our own.

YoY in Economics

“Year over year,” or YoY, refers to the process of comparing data from one year to data from the previous year. 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. An excellent example of this is Meta’s (formerly Facebook) 2021 financial highlights from its investor page. The statement shows the year-over-year changes for a three-month period from the end of 2021 and the period December 2020 to December 2021.

Both the pageviews and sales have increased YOY by 20% and 50% respectively, resulting in an overall 25% YOY increase in conversion rate. In Year 1, we divide $104m by $100m and subtract one to get 4.0%, which reflects the growth rate from the preceding year. On that note, it would be inaccurate to assume that the current year was necessarily “worse” than the prior year without a deeper dive analysis. Year-to-date (YTD) looks at a change relative to the beginning of the year (usually Jan. 1).

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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. 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. Also, YOY is not the right solution for new businesses as they can’t look at the previous year’s statistics. Until your company makes progress, you can rely on MOM or QOQ (quarter-over-quarter) techniques.

In other words, revenue increased by $10 million compared to the previous year, which amounts to a 10% YoY revenue growth. YoY stands for year-over-year, which is a way to compare the financial results of a time period compared to the same period a year earlier. YoY is often used by investors to evaluate whether a stock’s financials are getting better or worse.

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. By comparing months in a year-over-year fashion, the comparison becomes more relevant than two consecutive months that are affected by varying seasonality or other factors. 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.

The YoY approach may also be useful in analyzing monthly revenue growth, especially when the sources of revenue are cyclical. This allows an apples-to-apples comparison of revenue is now the time to buy stocks instead of comparing revenue month-over-month where there may be large seasonal changes. Companies selected for inclusion in the portfolio may not exhibit positive or favorable ESG characteristics at all times and may shift into and out of favor depending on market and economic conditions. Environmental criteria considers how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates.