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What is Year-over-Year (YoY)?

2023.06.20

Key Takeaways
Year-over-year (YoY) is a financial metric that compares the performance of a particular metric over a 12-month period, compared to the same period in the previous year. It is commonly used to assess the growth or decline of a company or industry over time.

 

How is Year-over-Year (YoY) Calculated?

YoY is calculated by taking the difference between a particular metric for the current period and the same period in the previous year, and then dividing that difference by the metric for the previous year. The formula for calculating YoY is:

 

YoY = ((Current Metric – Metric for Same Period Last Year) / Metric for Same Period Last Year) x 100%

 

Where:

  • Current Metric = the value of the metric for the current period
  • Metric for Same Period Last Year = the value of the metric for the same period in the previous year

Significance of Year-over-Year (YoY) in the Financial Industry

YoY is a crucial metric that is widely used in the business and financial industries. It provides investors and businesses with valuable insights into the growth or decline of a company or industry over time. YoY is commonly used to evaluate the financial performance of a company, such as its revenue, profits, and earnings per share.

 

Investors and businesses can use YoY to identify trends and patterns in the performance of a company or industry. For example, if a company has consistently reported YoY growth in its sales over several quarters, it suggests that the company is growing and expanding its market share.

 

YoY is also useful for comparing the performance of different companies or industries. For example, if two companies in the same industry report their YoY growth rates, investors can compare their performance and identify which company is growing at a faster rate.

Risks of Relying Solely on Year-over-Year (YoY)

While YoY is a useful metric for evaluating the performance of a company or industry, it should not be used in isolation. There are many factors that can impact a company’s financial performance, such as changes in the market, economic conditions, and company-specific factors.

 

Additionally, YoY growth rates can be affected by seasonality and other factors that can distort the comparison between different periods. Therefore, investors and businesses should consider a wide range of financial and non-financial factors when evaluating the potential of an investment.

Year-over-year (YoY) is a crucial financial metric that is widely used in the business and financial industries. YoY provides investors and businesses with valuable insights into the growth or decline of a company or industry over time. However, investors and businesses should not rely solely on YoY when evaluating an investment, as there are many factors that can impact a company’s financial performance. It is important to consider a wide range of financial and non-financial factors when evaluating the potential of an investment.