Year-over-year (YoY) growth represents the percentage change in a specific metric between one year and the corresponding period of the previous year. The calculation involves subtracting the value of the metric in the prior year from the value in the current year. This difference is then divided by the value in the prior year. Finally, the result is multiplied by 100 to express the growth as a percentage. For instance, if a company’s revenue was $1 million last year and $1.2 million this year, the increase would be $200,000. Dividing $200,000 by $1 million yields 0.2, which when multiplied by 100, results in a 20% growth rate.
Analyzing this growth rate provides a clear perspective on business performance by mitigating the impact of seasonal variations. It offers a valuable benchmark for tracking a company’s progress and comparing its performance against industry competitors or overall market trends. Historically, this measurement has been instrumental in financial analysis, allowing stakeholders to understand long-term trends and make informed decisions regarding investment, resource allocation, and strategic planning.