# Year Over Year (YOY)

#### Quick Summary of Year Over Year (YOY)

Year Over Year (YOY) refers to the mathematical process of comparing one year of data to the previous year of data.

### What is the dictionary definition of Year Over Year (YOY)?

#### Dictionary Definition

In financial analysis and data analytics, YOY is the acronym for year over year.

yearoveryear calculation compares a statistic for one period to the same period the previous year. The period is typically based on a monthly or quarterly basis.

#### Full Definition of Year Over Year (YOY)

Year-Over-Year is a frequently used financial term and put simply it is where you compare the results from one year to another to identify annual trends, shifts in the market, or changes in performance amongst other things. A year-over-year (YOY) analysis is where you compare the results from one year with the results for the same period the year before. When completing a year-over-year analysis people will often look at the same month in each year, or the same quarter of each year.

The year-over-year growth rate determines the percentage change that has occurred throughout the last 12 months.

By looking at the year-over-year performance you are able to gauge whether a company’s financial position is worsening, staying the same, or improving. For example, you may read that a company has recorded a growth in sales and revenues in the second quarter for the third year in a row.

### Explanation of Year-Over-Year

A year-over-year comparison is an effective and popular way to evaluate both the performance of investments and the performance of a company. Any event that is both measurable and repeats annually can be evaluated using a year-on-year analysis. Often companies will use a year-on-year analysis to measure compare monthly, quarterly or annual performance.

### Key things to remember

• Year-over-year is an analysis tool to measure a minimum of two measurable events between one year and another year, usually between the present year with the previous year
• Year-over-year evaluations are an effective tool for measuring the financial performance of a company, as a result, they are popular.
• A year-over-year analysis will often be used by investors to determine a companies financial performance and so whether to invest.

### Pros and Cons of year-over-year analysis

Pros of year-over-year analysis

• A year-over-year analysis removes seasonality because it looks at specific points in time. For example, in the retail sector sales will rise in November and December due to Christmas. This shopping season accounts for almost 20% of annual sales for the sector, therefore it is the most critical time of the year. So it may be that you see a rise in sales, but that this happens every year. If you saw a 25% rise in sales for this period, you might be happy. However, if you compare it with the previous year and find that your sales rose 35% for this period you would realise that in fact, your sales are down for this period.
• By using a year-over-year analysis you remove any market volatility from your data results, as you can now compare net results for the period being analysed
• There is no need for a financial calculator or a spreadsheet as a year-on-year analysis is fairly easy to calculate
• Results from a year-over-year analysis are displayed in percentages which makes it easy to compare companies of different sizes

Cons of year-over-year analysis

• If one time period had negative growth the results can be meaningless. If the company has experienced a time of negative growth, the following period of growth won’t make much sense.
• A year-over-year analysis does not provide an in-depth analysis of a companies growth story, as a result, it should be used in conjunction with other business metrics. It provides a lot of information when used to compare just a few time periods, as it highlights trends, however it does not tell the whole story.
• If problems have arisen in a given month, these may not show in a year-over-year analysis as it could just be comparing the whole year or quarter.
• It will not provide you with the complete picture.

Something to remember: it is not considered a good idea to just rely on the year-over-year analysis of a companies financial position. It is useful to look at the monthly’s as well and be certain to use other metrics to give you a complete picture.

#### Examples of Year Over Year (YOY) in a sentence

The £14.7 million figure expressed above represents 34.7% growth year-over-year.
This website had 75,000 page views on the third Friday of March, which was a 20% increase YOY.

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#### Definition Sources

Definitions for Year Over Year (YOY) are sourced/syndicated and enhanced from:

• A Dictionary of Economics (Oxford Quick Reference)
• Oxford Dictionary Of Accounting
• Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th May, 2020 | 2,151 Views.