Year Over Year (YoY) Analysis: Guide, Calculation & Template

What is Year Over Year Analysis (YoY) Analysis?

Year-Over-Year (YoY) is a type of financial analysis used to compare data between time series. It is a data comparison of one time period (ex: a month) against the comparable previous period (ex: the same month in the previous year). Year-Over-Year (YoY) analysis is used in economic and investment analysis and helps to comprehend the growth pattern from year to year.

As an example, an investor would be keen to compare the performance of investment returns on a year-over-year basis to decide whether to invest or not, understand the growth pattern, and also choose the best with multiple investment options.

One of the major benefits of using the Year-over-Year (YoY) approach is that you can analyze performance on an annual, quarterly, or even monthly basis as required. This method enables the comparison of statistics while accounting for seasonal variations, rather than relying solely on overall returns for evaluation.

As an example, Quarter 4 in any year (Jan, Feb, March) is a comparatively less performing quarter for most companies. Company management can do a YOY analysis to compare the current year’s Quarter 4 with the last year’s Quarter 4 to understand whether the company is growing (considering the seasonal factor), rather than comparing Quarter 4 with Quarters 3, 2, and 1 in the same year.

Another example is that: Most companies expected to improve sales in the December month of any year due to the Christmas season. Comparing the sales data of the December month between years will be more beneficial for the investors rather comparing the yearly total. Investors can easily figure out the revenue trend and growth while considering the seasonal factor.

Template for Calculate Year Over Year Analysis (YoY)

The below sample Excel (spreadsheet) template contains the monthly Year-Over-Year (YOY) calculation for three consecutive years. This is a fully editable file where you can download, comprehend, and amend this according to your preference.

Sample Spreadsheet (Excel) for Year-Over-Year Growth Calculation
Sample Spreadsheet (Excel) for Year-Over-Year Growth Calculation

Formula to Calculate Year Over Year (YoY)

There are two approaches to calculating the Year-Over-Year (YoY),

Approach 1: Current year value divided by the previous year’s value, subtract the result from 1

Example (a): If a return on investment was $10,000 in Year 2 and $12,500 in Year 2, the YOY growth can be calculated as ($12,500 / 10,000) – 1, resulting in 25%.

Example (b): Clothing company Year 1 December month sales were $63,000 and Year 2 December month sales were $78,000. The YOY growth can be calculated as ($78,000 / $63,000) – 1 = 23.8%.

Year Over Year Analysis Growth (YoY) Formula (1)
Year Over Year Analysis Growth (YoY) Formula (1)

Approach 2: Current value minus the previous value and then divide the result by the previous value

Example (a): if a return on investment was $10,000 in Year 2 and $12,500 in Year 1, the YOY growth can be calculated as ($12,500 – $10,000) / 10,000, resulting in 25%.

Example (b): Clothing company Year 1 December month sales were $63,000 and Year 2 December month sales were $78,000. The YOY growth can be calculated as ($78,000 – $63,000) / $63,000 = 23.8%.

Year Over Year Analysis Growth (YoY) Formula (2)
Year Over Year Analysis Growth (YoY) Formula (2)

Importance and Usage of Year Over Year (YoY)

1. Year Over Year (YoY) method is useful to compare any metric like investment return, revenue, profit, cost, sales quantity, sales returns, machine hours, waste, and employee hours worked.

2. Company management can view how the company operations have changed over the last year by comparing the company’s performance status at the same point in the previous year (ex: compare the current year’s January month with last year’s January month statistics).

3. Company financial metrics like sales and profits change during different periods of the year because most businesses have a high-demand season and a low-demand season. Month-to-month comparison helps to analyze performance in the same month in the year.

Example: December seasonal sales of this year versus last year, to understand whether the company has improved the sales compared with last year’s Christmas season.

4. The company board can baseline the company financials using the YOY analysis. By conducting the YOY analysis of the last couple of years in a row, the company’s board can establish the baseline revenue or other financial metric to provide a target to the management team.

5. Financial investors can use the YOY analysis to foresee the returns of their investment and decide whether to proceed with the investment or not.

Advantages of Year Over Year (YoY)

  • Help mitigate seasonality factors
  • Does not require complex calculation methods
  • Results percentage value which easily comparable
  • A popular and effective way to evaluate the financial statistics of a company
  • Trend and growth are directly visible in the analysis

Disadvantages of Year Over Year (YoY)

  • Does not provide information on how to improve performance
  • Not suitable for startup companies since no previous stats are available
  • Can the company only two measured events

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