How Investors Can Calculate Year-Over-Year (YOY) Growth
SmartAsset Team
5 min read
An investor calculating year-over-year growth.
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Year-over-year (YOY) growth is a performance indicator often used by investors to measure financial progress and compare results from one period to another. The measurement, which looks at change across two comparable periods of time, can provide valuable information about trends, risks and opportunities. Investors can then use this information to evaluate the performance and value of a company, sector or market, and thus make more informed financial decisions.
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What Is YOY Growth?
YOY growth is the percentage change in a certain metric-like revenues, earnings or customers-from one year to the next. It helps you evaluate how a stock's main metrics are growing over time and identify any trends or patterns. For example, if a company’s sales increased by 10% in 2025 when compared with 2024, that would mean 10% YOY growth.
YOY is often used to compare growth from a quarter of one year to the same quarter in the previous year. This helps smooth out any effects due to seasonality and gives a more accurate picture of a company's performance.
As an example, the fourth quarter is the most important quarter for retail companies because of the holiday season. As such, comparing a company’s performance in the fourth quarter of 2025 with the fourth quarter of 2024 would give a better idea of a company's performance than if you were to compare it with the third quarter of 2025.
On the other hand, a company could try to show impressive quarterly performance but may fail to show that it's improving over a longer period of time when calculated year-over-year. Or, a company could claim its overall performance is growing, when in reality individual quarters display different trends.
Calculating YOY growth, thus, offers a better understanding of a company’s true business performance because it adjusts for any effects of seasonality.
How to Calculate YOY Growth
An investor evaluating year-over-year growth of a company.
To calculate YOY growth, you can use this simple formula:
YOY Growth (%) = (Current Year Value – Previous Year Value) / Previous Year Value x 100
For example, if a company’s revenue was $1,000,000 in 2024 and $1,200,000 in 2025, the YOY growth would be 20%. The math would look like is:
The YOY growth can be positive or negative, depending on whether the current year value is higher or lower than the previous year value. A positive YOY growth shows an increase, while a negative YOY growth shows a decrease.
You can also calculate YOY growth for each quarter by comparing the same quarter in different years. For example, if a company’s revenue was $250,000 in the first quarter of 2024 and $300,000 in the first quarter of 2025, the YOY growth for Q1 would be 20%. To make this calculation, you would simply substitute quarterly numbers for the annual numbers used in the formula above.
The Importance of YOY Growth for Investors
YOY growth is important for investors to consider because it provides insight into a company's financial performance, trends and growth trajectory over time.
Helps track a company’s performance. YOY growth allows investors to track the performance of a single company and its various metrics like revenue, profit and expenses, and then evaluate trends and patterns over time. It also helps identify seasonality effects, allowing investors to make more detailed comparisons.
Enables comparisons. Calculating the YOY growth of individual metrics for companies makes it easier for investors to make comparisons across companies, sectors or markets. They can evaluate which companies are growing faster and assess how similar companies perform. This helps with relative valuation by aiding in identifying undervalued and overvalued companies when evaluating stock prices.
Provides signals about risks and opportunities. YOY growth can also provide important signals to investors about risks and opportunities. For example, YOY growth that is consistently positive and accelerating indicates high growth traction-in other words, an opportunity. Meanwhile, YOY growth that is slowing or turning negative could indicate a potential risk or a sign of a problem.
Another advantage of YOY growth calculations is their simplicity. The calculation is easy to understand and compute, even for novice investors or small business owners who are creating balance sheets for the first time. By focusing only on the two most recent periods, YOY growth also filters out any day-to-day fluctuations in financial performance.
Bottom Line
An investor making adjustments to her investment portfolio.
YOY growth could help investors compare a company’s performance against competitors and over time. It can also show a company's progress and momentum, but should not be used alone. Combining it with other financial metrics will give you a clearer picture of a company’s value and future potential.
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