TIMTHOMAS

Year-Over-Year (YoY): Definition, Examples & Why It Matters

In finance, business, and investing, you are likely to come across the phrase “year-over-year” (abbreviated as YoY) quite often.

First, a quick definition of what year-over-year means.  Year-over-year compares results from one time period to the same time period in the previous year.

What Is Year-Over-Year?

When a company reports its quarterly financial results, it will typically at least announce its revenue and earnings-per-share for the preceding three-month period.

These figures, along with a host of other quarterly numbers, are provided in the income statement, balance sheet, and statement of cash flow.

Aside from the quarterly financial statements, companies typically also discuss their results in a press release and a conference call with analysts who cover the stock.

Why Is Year-Over-Year Important?

In many ways, a year-over-year comparison is more valuable for investors than a quarter-over-quarter, or “sequential” comparison.

First, there are many companies that operate cyclical businesses, in which a large portion of annual revenue is generated in a specific quarter.

Think of retailers such as department stores, which generate the vast majority of their annual profits in the fourth quarter, during the busy holiday shopping season.

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