Year-over-year analysis provides valuable insight into changes and trends in various metrics such as revenue, sales, and profits over a 12-month period.
Knowing how to calculate year-over-year growth is a fundamental skill in evaluating a company’s progress.
This comprehensive guide explains what year-over-year growth is and provides a step-by-step tutorial on how to calculate year-over-year growth in a spreadsheet program.
Contents
How to Calculate YoY Growth
- The difference is calculated by subtracting the initial price of 12 months ago from the value of the current month.
- Divide the difference by the initial value.
- Multiply by 100 to get the percentage
What is YoY?
Year-over-year (YoY) is a business and financial term that compares the performance or growth of a particular statistic or metric over a specified time period to the same period last year.
It is a method of studying trends and discovering patterns by measuring changes in variables over a 12-month period.
When looking at year-over-year data, the values of the same measure are compared between two coincident time points. These points often occur at the end of consecutive years. This comparison provides information about the rate of change or growth of the variable over that time period.
YoY is often used in financial reports, economic evaluations, and performance appraisals to quantify the relative success or failure of a company, industry, or market.
for example, if a company had revenue of $1 million in June 2022 and revenue of $1.2 million in June 2023, the year-over-year revenue growth is 20% ($1.2 million – $1 million) / $1 million x will be 100%.
Year-over-year comparisons are particularly useful for removing seasonal effects, as they compare datasets from the same time period in different years. This not only allows us to more accurately assess long-term trends, but also allows us to identify patterns and predict future performance.
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How to Calculate YoY Growth (Step-by-Step)
Year-over-year (YoY) growth is calculated by comparing the change in a particular metric or value from one year to the next and expressing it as a percentage.
method:
Year-over-Year Growth Rate = ((This Year’s Value – Last Year’s Value) / Last Year’s Value) * 100
Further subdividing it looks like this:
- Current year value: The value to analyze for the current year.
- Last Year’s Value: The previous year’s value.
This formula gives the year-over-year growth rate as a percentage.
Here’s a step-by-step example of how to calculate year-over-year growth:
- Determine initial and final values. Typically, you pick the current month’s value and compare it to the month’s value 12 months ago. Consider, for example, the annual revenue of a company.
Jan 2022 = $500,000 Jan 2023 = $700,000
- Calculate the difference by subtracting the current year’s value from the previous year’s value.
$700,000 – $500,000 = $200,000
- Divide the difference by the initial value: Divide the difference calculated in step 2 by the initial value.
$200,000 / $500,000 = 0.4
- Multiply by 100 to get the percentage. Multiply the result of step 3 by 100 to express the year-over-year growth as a percentage.
0.4 * 100 = 40%
In this example, the company’s annual revenue growth rate is 40% year-over-year. This represents a 40% increase in revenue from last year to this year.
You can also use a year-over-year growth calculator (such as the one in the example below) to cross-check your calculations.
Our Template in Google Sheets or Excel
This guide uses the following sample sheets:
You can make a copy of the sample spreadsheet for Google Sheets or download it for Excel.
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How to Calculate Year over Year Growth in Excel or Google Sheets.
To calculate year-over-year (YoY) growth in Excel or Google Sheets, you can use the following steps:
- Open a new or existing spreadsheet in Excel or Google Sheets.
- Enter an equal sign (=) in the ‘YoY’ column cell and add a left parenthesis’
- Select the cell containing the current year value.
- Add a minus sign and select the cells containing the values for the previous year.
- Close the bracket. Add a / to select the previous year’s cell and divide the result by the previous year’s value.
- Close the brackets and add *100 to convert to percentage.
- Click Enter and check the autocomplete suggestions to copy the formula. You can also copy the formula by dragging it to the rest of the column.
This formula calculates year-over-year growth by subtracting the year 1 value from the year 2 value, dividing the result by the year 1 value, and multiplying by 100 to express as a percentage.
The value has too many decimal points, so you can use the icon to reduce the number of decimal places and round to the nearest 0.01.
Optionally, you can format the cells containing year-over-year growth as percentages or apply other formatting options such as.
You can see the year-over-year growth rate calculated using analytics to understand the rate of change or growth of a metric from one year to the next. A positive growth rate indicates an increase and a negative growth rate indicates a decrease.
The same formula works in Excel and you can use the same steps as above:
Why is YoY Important for Companies?
Many companies use year-over-year analysis to understand their company’s progress. Year-over-year analysis is important to companies for several reasons:
Assessment of the Organization’s Performance
Year-over-year analysis allows companies to assess their performance over time. Companies compare metrics such as revenue, profit, and sales from year to year. This allows you to assess your own growth or decline.
This analysis provides insight into whether a company is progressing, stagnating or facing challenges. The results show the difference between the indicators over a one-year period, allowing companies to compare their previous and current situation.
Analysis of Trends
Year-over-year analysis helps identify trends and patterns in a company’s performance. This enables companies to identify recurring seasonal fluctuations, cyclical patterns, or long-term growth trends.
Analysis allows you to see how different moons have changed over the years and notice patterns in those changes. This information is critical for decision making, strategic planning, and resource allocation.
Compare Against Competitors
Year-over-year analysis allows companies to compare their performance against competitors and industry standards.
If companies have access to their competitors’ year-over-year analysis, they can compare it to their own. This allows us to better understand our market position and competitive advantage by comparing our year-over-year growth rates to others in the same sector. This helps us identify areas where we can improve or pursue opportunities.
Forecasting Future Performances
Year-over-year analysis provides a basis for predicting future performance. Analysis can be recorded over several years, and by analyzing past year-over-year growth rates, you can spot frequently occurring patterns.
Using these patterns, businesses can make informed predictions and set realistic goals for the coming year. It helps determine budgeting, resource planning, sales, revenue, or market share goals.
Presentation to Stakeholders
Year-over-year analysis helps communicate a company’s performance to investors, stakeholders, and shareholders. It provides a concise and standardized way to display financial and operational information. Year-over-year growth rates demonstrate the company’s ability to generate consistent returns, attract investors, and instill confidence in its stakeholders.
Evaluate Strategy Effectiveness
Year-over-year analysis helps companies assess the effectiveness of their strategies, initiatives, and marketing campaigns. By comparing results from different time periods, companies can measure the impact of specific actions or changes taken over time. It helps identify successful strategies and areas for improvement.
Frequently Asked Questions
What Is the Formula for Year over Year Growth?
The formula for year-over-year growth is as follows:
Year-over-Year Growth Rate = ((This Year’s Value – Last Year’s Value) / Last Year’s Value) * 100
Current Year Value – The value to analyze for this year.
Last Year’s Value – Last Year’s Value.
This formula gives the year-over-year change in percentage format.
How Do You Calculate Year Over Year Growth in Excel?
To see year-over-year growth in Excel:
- Open a new or existing spreadsheet in Excel.
- Enter an equal sign (=) in the YoY column cell and add two opening parentheses.
- Select the current year cell.
- Add a minus sign to select cells for the previous year.
- Close the bracket. Add a / to select cells from the previous year.
- Close the brackets and add *100 to convert to percentage.
- Click Enter and drag the formula to the rest of the column to copy it.
Wrapping Up
Year-over-year growth analysis allows you to assess performance and identify patterns and trends. So far, you’ve learned how to calculate year-over-year growth and how to do it in Excel or Google Sheets.
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