Table of Contents
- What Is Year-Over-Year (YOY)?
- Key Takeaways
- How Year-Over-Year (YOY) Works
- Benefits of Year-Over-Year (YOY)
- Uses of Year-Over-Year (YOY)
- Example of Year-Over-Year (YOY)
- What Is YOY Used For?
- How Is YOY Calculated?
- What’s the Difference Between YOY and YTD?
- What If I Am Interested in Comparisons of Less Than a Year?
- The Bottom Line
What Is Year-Over-Year (YOY)?
Let me explain year-over-year (YOY) to you directly—it's a common financial comparison method, sometimes called year-on-year, that looks at two or more measurable events on an annualized basis. By observing YOY performance, you can gauge if a company's financial situation is improving, staying the same, or getting worse. For instance, you might see in financial reports that a business's revenues have increased for the third quarter on a YOY basis over the last three years.
Key Takeaways
Year-over-year (YOY) evaluates two or more measured events by comparing results from one period to a comparable period on an annualized basis. These YOY comparisons are a popular and effective way to assess a company's financial performance. If you're an investor looking to understand a company's health, you'll find YOY reporting essential.
How Year-Over-Year (YOY) Works
YOY compares a company's financial performance in one period with its numbers from the same period one year earlier. This approach is more informative than month-to-month comparisons, which can be skewed by seasonal trends. You'll commonly see YOY used for annual, quarterly, and even monthly performance evaluations.
Benefits of Year-Over-Year (YOY)
YOY measurements make it straightforward to cross-compare data sets. For example, if you're analyzing a company's first-quarter revenue with YOY data, you can look at years of first-quarter figures and quickly determine if revenue is rising or falling. By focusing on the same months across different years, you get accurate comparisons that account for seasonal consumer behavior. This is particularly useful for investment portfolios, where you want to track how performance evolves over time.
Uses of Year-Over-Year (YOY)
YOY comparisons are popular for analyzing company performance because they help reduce the impact of seasonality, which affects most businesses. Sales, profits, and other metrics fluctuate throughout the year due to peak and low-demand seasons. Take retailers, for instance—they see peak demand during the holiday season in the fourth quarter. To accurately measure performance, you should compare revenue and profits YOY. It's crucial to compare fourth-quarter results in one year to the fourth quarter in previous years. If you compare fourth-quarter to the prior third quarter, it might look like unprecedented growth, but that's often just seasonality at play. Similarly, comparing fourth quarter to the next first quarter might show a dramatic decline, again due to seasonal factors. YOY differs from sequential comparisons, which look at one quarter or month against the immediate previous one to show linear growth, like cell phone sales from third to fourth quarter or airline seats filled from December to January.
Example of Year-Over-Year (YOY)
Consider Apple's income statement from Q1 2025: total net sales were $124.3 billion, compared to $119.6 billion in Q1 2024, marking a 3.9% YOY increase. Net income for Q1 2025 was $36.3 billion, up from $33.9 billion in Q1 2024, which is a 7.07% YOY rise.
What Is YOY Used For?
YOY is used to compare one time period to the same one a year earlier, allowing for annualized assessments like third-quarter earnings this year versus last year. You see it commonly in evaluating company growth in profits or revenue, as well as in economic indicators like money supply, GDP, and other measurements.
How Is YOY Calculated?
Calculating YOY is straightforward and typically expressed as a percentage. You take the current year's value, divide it by the prior year's value, subtract one, and then multiply by 100 to get the percentage change.
What’s the Difference Between YOY and YTD?
YOY examines a 12-month change, while year-to-date (YTD) looks at changes from the start of the year, usually January 1. YTD gives a running total, whereas YOY provides a direct point of comparison.
What If I Am Interested in Comparisons of Less Than a Year?
You can calculate month-over-month or quarter-over-quarter in the same way as YOY. In fact, you can apply this to any time frame you choose.
The Bottom Line
Year-over-year (YOY) is a practical tool for financial analysts, companies, and investors like you. It compares financial figures from one point in time to the same point a year earlier, giving a clear view of whether performance is improving, worsening, or static. This helps companies decide if they need to make changes, informs you as an investor about portfolio adjustments, and allows analysts to describe a company's financial health and predict future trends.
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