Year Over Year YOY Analysis: A Simple Guide

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. However, by comparing 2020’s Q4 over 2019’s Q4, the earnings-per-share declined by 62% due to the Coronavirus pandemic. YOY comparisons are swing trading patterns popular when analyzing a company’s performance because they help mitigate seasonality, a factor that can influence most businesses. Sales, profits, and other financial metrics change during different periods of the year because most lines of business have a peak season and a low demand season. For example, retail sales tend to spike leading up to the holidays.

• Very often, companies will use the YOY analysis to assess their financial performance such as sales, costs of goods sold, net profits, and other financial metrics that vary over time.
• In Year 1, we divide $104m by $100m and subtract one to get 4.0%, which reflects the growth rate from the preceding year.
• Please consult a qualified professional for this type of service.
• Investors will want to know how a stock or investment has been performing on a YOY basis when comparing different investment options.
• In turn, you can get a firm grip on these vital metrics indefinitely, keeping your business moving in the right direction in the process.

This information would help executives understand how revenue is growing from year to year, and not just for the current season. For it to be useful, year-over-year reporting should always compare performance with a similar time period. YTD returns can also be used to compare performance with a different year for the same time period. Analyzing current performance against historical data reveals what trends are taking place.

YOY Meaning FAQ

By knowing how to calculate YoY growth, you can track your ongoing progress both efficiently—and with confidence. Let’s say your business sells Marketing Audits where you check out a website and their marketing and give them the 80/20 of what can be changed. It’s also helpful when coming up with looking at past performance to forecast out a new budget or determining how much a specific tactic or channel is performing. Year-over-year (YoY) is simply a comparison of one period of time with the same period from the previous year.

To do this successfully and benchmark your progress, the two periods you’re looking to work with should be directly comparable. These timeframes don’t necessarily have to equate to a whole financial year—they simply have to mirror one another. Do you know how your business is performing this year compared to last? Due to the volatility of MoM figures, business owners and managers are advised not to make any long-term business decisions based on MoM information. To find this percentage, you need to subtract the previous month’s value from this month’s value, divide the result by the previous month’s value, and multiply by 100.

Reporting acronyms YTD, YoY, MTD, MoM Explained

Manufacturing jobs have been declining for years, so calculating the rate of job loss in this industry is an effective way to measure how much and how quickly it’s changing. Year over year is just one rate businesses should be calculating to measure success as part of their accounting work. It’s also important to look at other metrics to get a full picture of how a company is performing because YoY won’t show everything on its own. Still, YoY remains a popular bookkeeping method to analyze performance for many business owners, and with good reason. Doing so will empower you to spot where specific peaks and troughs lie.

Alternative Metrics to YOY

In addition, another important consideration is that growth inevitably slows down eventually for all companies. Plus, any cyclical patterns will become apparent if the ebitda growth rate historical results reflect a full economic cycle. In the other states, the program is sponsored by Community Federal Savings Bank, to which we’re a service provider.

Why Do You Need YoY Analysis?

As you can see, YoY reporting gives a more global, stable view of company performance despite factors such as seasonality. It allows executives to be even more strategic and to make good decisions different types of stocks even in changing business environments. Year-over-year (YoY) is a metric that refers to the 12-month change of a particular value and compares it to the change in a different period.

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. 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. It’s important to compare the fourth-quarter performance in one year to the fourth-quarter performance in other years.

Some businesses also use compound monthly growth rate (CMGR) to show growth over a given number of months. CMGR can also be used to predict likely performance over the next few months. Since YOY is an easy and effective way to measure performance or financial metrics over time, anyone in business should be familiar with this term. YOY calculations can be used to evaluate a company’s performance over time. This can help make comparisons and assess the progress of your business.

It can also be used to compare the performance of competitors or peers. There are many quantifiable events that can be measured on a year-over-year basis, such as the year-over-year progression of revenues, expenses, financial ratios, or any other financial metrics. YoY stands for Year over Year and is a type of financial analysis used to compare results from a period of time in one year to the same period of time in the prior year. YOY is in contrast with sequential analysis which uses two consecutive monthly or quarterly figures. However, when using the annual figures both these metrics would give the same answer.

On the other hand, YOY calculations can start from a specific date. They also compare the numbers with those from the year earlier. Kellogg predicted that adjusted earnings would drop by a further 5% to 7% in 2019 as it continued to invest in alternate channels and pack formats.

It is used by private entities, government institutes, and individuals alike. However, the quality of the revenue being generated could have improved despite the slightly lower growth rate (e.g. long-term contractual revenue, less churn, fewer customer acquisition costs). Under either approach, the year over year (YoY) growth rate comes out to 20.0%, which represents the variance between the two periods. The formula used to calculate the year over year (YoY) growth rate is as follows. Armed with this intelligence, you can explore any patterns related to a competitor’s product launch or seasonal campaign and use this information as inspiration for your own business strategy.

At the same time, you know that the tenant just won a large multi-year contract with the IRS that will provide stable revenue over the next 10 years. For example, a business can compare the sales figures of the first or third quarter of two years through YOY analysis. Year-over-Year can be used for several different types of performance metrics including financial and economic performance indicators.