Year Over Year (YoY)
What Does Year Over Year Mean
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.
The data observed in a year-over-year format can be taken from the span of separate months, quarters or even full years, but each data set must be from the same length of time in order to provide accurate context–for instance, one might look at how a company has performed in quarter one over the past four years, but it would be unhelpful to compare a company’s performance in Q1 2019 to that in January 2020 or in Q3 2018.
Year Over Year Importance
The year-over-year format is a crucial tool to evaluate the direction in which a company’s financial performance is trending.
Are its revenues increasing or decreasing? What about its debt? Is its bottom line staying steady amid greater industry and economic trends that may affect it?
Whatever the financial category, as long as it can be measured over a standard length of time, it can be evaluated on a year-over-year basis.
Year Over Year Growth
The most common application of Year-Over-Year data is called Year Over Year growth, or YOY growth.
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.
Year Over Year Meaning For Investors
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.
Investors also prefer Yoy data because it accounts for the effects of seasonality by comparing the same period of time over separate years, thus allowing for a clearer grasp of the direction in which the company is trending.
Year Over Year Percentage Change
The year over year percentage change is the figure by which year over year growth is measured.
It shows just how much better or worse a company is doing in a certain metric compared to the same period of time.
For instance, rather than use the raw numbers to show how much a company’s net profit has increased between Q1 2019 and Q1 2020, a year over year percentage change is expressed by saying that profit has increased by 18%.
How To Calculate YOY Growth
To calculate year over year growth, start with the metric from the two data sets that you want to compare, such as revenue or net profit.
Once you have done so, find the corresponding metric from each data set. Take the most recent data figure and subtract the other figure from it.
Then divide that number from the second data figure. You will end up with a figure lower than one and expressed in decimals, so multiply that number by 100 to get a figure you can express as a percentage.
Calculate YOY Percentage Change
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. The divide $27,000 by $155,000.
Then multiply the resulting figure, which can be rounded to 0.1742, by 100.
That number represents the year over year growth, or percentage change, in that company’s net profit.
Now, an analyst can take that data and say that this company increased its bottom line by 17.4% between 2018 and 2019.