What does YoY Mean?
YoY stands for year-over-year, which is a way to compare the financial results of a time period compared to the same time period a year ago. YoY is often used by investors to evaluate whether a company’s financials are getting better or worse.
If a company’s revenue and earnings are growing year-over-year, then that is a good thing and indicates that the company is growing. If these numbers are declining year-over-year, that suggests the company is shrinking.
A company had $110 million in revenue in 2018, compared to $100 million in 2017. In other words, revenue increased by $10 million compared to the previous year, which amounts to a 10% YoY revenue growth.
Another company had $50 million in earnings in the fourth quarter of 2018, but they had $100 million in earnings in the fourth quarter of 2017. This means that earnings decreased by 50% year-over-year.
Here’s an example of how Facebook’s financial performance changed YoY in 2018:
How to Calculate: Formula
The formula to calculate YoY growth or decline is simple. You simply divide the new number with the old number to find the ratio. To convert to percentages, you can subtract by 1 and then multiply the total number by 100.
Here is the formula:
Why YoY is important
Looking at year-over-year comparisons for companies is one of the simplest ways to tell whether they are growing or declining.
It is generally smarter to invest in companies that are growing because they tend to increase their revenue and earnings over time, leading the stock price to increase.
On the other hand, companies that have declining revenue and earnings tend to see a reduction in share price.