Year-Over-Year YOY in Finance: Definition, Formula & Example

This informs companies on how their business is operating and if changes need to be made. It informs investors if their portfolio needs adjustment, and analysts use it to describe the financial health of a company and make future predictions. YoY compares data from the same period in two consecutive years to measure growth or decline. For pharmaceutical companies, YOY data helps assess the market performance of different drugs, the success of clinical trials, and how market conditions are impacting drug sales. By comparing sales or clinical trial results from one year to the next, pharmaceutical companies can forecast demand, optimize production schedules, and evaluate regulatory changes that may impact the market.

Sales Trends and Forecasting

Thousands of people have transformed the way they plan their business through our ground-breaking financial forecasting software. Learn how tools like Brixx help accounting firms work smarter, serve clients better, and stay ahead in a fast-changing industry. Having a business planning cycle helps your vision to keep on track, but what exactly is the process? Instead of obsessing over the short-term wins and losses, YOY will give context to overall long-term patterns. Comparing YOY helps show what’s working and what isn’t – and where you’re heading next. It’s just a simple way of measuring something like sales this year vs last year.

• For example, if your sales in Q are 15% higher than Q4 2023, this may indicate a trend toward increasing holiday sales, allowing you to prepare for increased demand.
• It is common for companies to identify their annual growth for specific metrics such as sales, expenses, revenue, and, most importantly, profit.
• Taking the time to adjust for anomalies, validate data, and consider long-term trends will ultimately help you make more informed and effective business decisions.
• YOY analysis is a simple yet powerful tool that can give you a clear, long-term view of your business performance.

During slower periods, a positive YOY growth rate can be much harder to obtain. At the end of the day, a YOY comparison will give you a much clearer view as to how things are progressing over time. Instead of comparing January’s profits to December’s – which would make zero sense – you will compare December this year vs December last year. This rate is essential for making informed decisions, setting future goals, and evaluating an organization’s overall health and development. The YoY growth of our company can be analyzed for an improved understanding of its growth trajectory, the implied stage of the company’s life-cycle, and cyclical trends in operating performance.

Example 1: Revenue Growth

By comparing revenue, expenses, and profits from year to year, you can assess the overall financial health of your business. YOY analysis helps you identify patterns in your finances, whether it’s growth in revenue, reduction in costs, or fluctuations in profits. Have you ever wondered if your business is really growing, or if that spike in sales is just a seasonal fluke? Year-over-Year (YOY) analysis is one of the best ways to get a clear picture of your company’s true performance over Football stocks time. By comparing data from one year to the next, YOY helps you see past short-term fluctuations and focus on long-term trends. YOY comparisons are popular when analyzing a company’s performance because they help mitigate seasonality, a factor that can influence most businesses.

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This helps analysts spot growth trends and patterns needed to make strategic business decisions. Sales performance is one of the most commonly analyzed metrics with YOY comparisons. By tracking sales data from year to year, you can spot trends in your business performance and forecast future sales more accurately. Understanding sales trends helps you prepare for fluctuations, plan inventory, and set realistic sales targets. Financial performance is one of the most critical areas where YOY analysis is used.

Year-over-Year (YoY) analysis is a foundational tool in financial reporting, enabling professionals to track growth, seasonality, and operational efficiency across comparable time periods. By exploring how technologies like AI are reshaping growth trends, this program helps professionals rethink how they approach year-over-year performance. For retail and e-commerce businesses, YOY analysis is invaluable for tracking sales growth, customer acquisition, and inventory management.

Revenue Growth Rate Assumptions

There are a few pitfalls that can skew your interpretation of the data or lead to inaccurate conclusions. Using YOY figures and comparing them to others in your industry allows you to see whether or not you’re keeping pace or falling behind. This benchmarking is essential for staying competitive and improving your business. However, smaller businesses may experience a much higher growth rate – especially when the scale. Let’s assume you are looking to calculate your company’s year-over-year revenue growth. Our first step is to project the company’s revenue and operating income (EBIT) using the following assumptions.

By monitoring both market trends and competitive positioning over time, you can make strategic decisions to capitalize on emerging opportunities and navigate challenges effectively. A high retention rate signals strong customer satisfaction and loyalty, whereas low retention rates might indicate that your products or services aren’t meeting customer expectations. The terms “financial model” and “financial plan” are frequently used interchangeably, which can lead to confusion. Yes, “YOY” stands for “year-over-year,” which means the same thing as “year-on-year.” Both terms compare data from one year to the same period in the previous year. Brixx has amazing features that can help you to track a whole host of metrics, alongside automating financial reports for your investors and colleagues. Year to date analysis will show you the data from the start of the year to the current working date – and then compare it to the same period of time in the prior year.

It supports smarter decisions

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. Sometimes, YoY can show you the direction of growth or shrinkage in a metric, or you can use it to demonstrate seasonality if you’re comparing quarter over quarter (QoQ) or month over month (MoM) instead. It’s a very simple comparison that says a lot and a way that you can string multiple years of data together to tell a story about your company’s past and potential future trajectory. In e-commerce, YOY comparisons help businesses gauge trends in online shopping, including changes in conversion rates, traffic volume, and customer satisfaction. For example, comparing website traffic and sales from Black Friday 2023 to Black Friday 2024 can help you understand the impact of your holiday marketing campaigns and refine your approach for future events. YOY analysis is essential for evaluating the success of your marketing campaigns and strategies.

Overall, YoY is essential for assessing performance in a way that smooths out short-term volatility and provides a clearer picture of sustainable growth. There’s very little you can’t compare year over year within the same company, but it’s not the only tool you should have in your arsenal. For YOY analysis to provide the most value, it’s important to follow best practices that ensure accuracy, consistency, and meaningful insights. These practices guide businesses in making the most out of the data they collect and analyze. This metric can be broken down further to analyze growth across different products, services, or regions, giving you a clearer picture of where the growth is coming from. While YOY analysis is a powerful tool, it comes with its own set of challenges.

How do you calculate YoY growth?

Pilot provides bookkeeping, CFO, and tax services for literally thousands of startups and growing businesses. To talk to an expert on our team and find out what Pilot can do for you, please click “Talk to an Expert” below, or email us at Antonio Di Giacomo studied at the Bessières School of Accounting in Paris, France, as well as at the Instituto Tecnológico Autónomo de México (ITAM). He has experience in technical analysis of financial markets, focusing on price action and fundamental analysis. After many years in the financial markets, he now prefers to share his knowledge with future traders and explain this excellent business to them.

If you compare data from different periods, such as comparing Q with Q2 2024, the results may be skewed, as you’re not comparing like-for-like periods. CAGR will help you to measure the annual growth rate of an investment or a financial metric over a period of multiple years. For large businesses, a growth rate of around 5% – 10% can be considered really positive. This is a stable amount, as businesses of a larger size have increased difficulty in ensuring they retain profitability. An absolutely key use of YOY is tracking just how well a business is doing over time. For example, if a business wants to learn how this year’s sales compare to last year’s.

• An absolutely key use of YOY is tracking just how well a business is doing over time.
• By comparing data from one year to the next, YOY helps you see past short-term fluctuations and focus on long-term trends.
• In this guide, we’ll walk you through everything you need to know about YOY analysis, from what it is and how to calculate it, to its benefits and real-world applications.

If you’re using accounting or financial management software, many of these platforms also offer built-in YOY analysis tools. These tools are often tailored to specific business needs, such as tracking profits, costs, or other financial metrics. It is common for companies to identify their annual growth for specific metrics such as sales, expenses, revenue, and, most importantly, profit.