How to Calculate Year-over-Year (YOY) Growth

Year-over-Year (YOY) growth measures the percentage change in a specific data point between a current period and the same period in the previous year. This comparison helps in understanding performance trends over time, whether in business or personal finance. It provides a clear view of how a particular measure, such as revenue, sales volume, or personal savings, has progressed annually.

Understanding Year-over-Year Growth

Year-over-Year growth smooths out the effects of seasonal variations that can distort shorter-term comparisons. For instance, a retail business might experience higher sales during holiday seasons, making a month-over-month comparison misleading. By comparing the current period’s performance to the exact same period a year prior, YOY analysis reveals underlying growth or decline patterns.

To calculate YOY growth, two data points are needed. You need the value for the current period you are analyzing, such as current year’s revenue or website visitors for a specific month. The second data point is the value for the exact same period in the previous year.

The YOY Growth Formula

The formula for calculating Year-over-Year growth is: ((Current Period Value - Previous Period Value) / Previous Period Value) 100. The “Current Period Value” is the data point for the most recent period. The “Previous Period Value” is the corresponding data point from the same period one year earlier.

Subtracting the Previous Period Value from the Current Period Value determines the absolute change. Dividing this difference by the Previous Period Value yields a decimal representing the growth rate. Multiplying this decimal by 100 converts the result into a percentage.

Step-by-Step Calculation Examples

For instance, imagine a business had $100,000 in revenue in January of last year and $120,000 in January of the current year. To find the positive growth, subtract $100,000 from $120,000, resulting in $20,000. Dividing $20,000 by $100,000 yields 0.20, and multiplying by 100 gives a 20% YOY growth rate.

For negative growth, if a website had 50,000 visitors in March last year but only 40,000 in March this year, the calculation would show a decline. Subtracting 50,000 from 40,000 results in -10,000. Dividing -10,000 by 50,000 gives -0.20, indicating a -20% YOY growth, or a 20% decline.

For zero growth, assume a personal savings account balance was $5,000 in April last year and remained $5,000 in April this year. Subtracting $5,000 from $5,000 results in $0. Dividing $0 by $5,000 yields 0. Multiplying by 100 means the YOY growth is 0%.

Interpreting Your Results

A positive YOY growth percentage indicates an increase in the measured metric compared to the same period in the previous year. For example, a 15% YOY revenue growth means the business generated 15% more revenue than it did during the previous year. This signals expansion or improved performance.

Conversely, a negative YOY growth percentage signifies a decrease in the metric. A -5% YOY change in expenses would mean expenses were 5% lower than the previous year, which could be a positive outcome. A -10% YOY change in sales, however, indicates a contraction in sales volume.

A zero percent YOY growth indicates that there has been no change in the metric from the previous year’s period. While the calculated percentage provides a direct measure of change, understanding the context of that number is also important. For example, a 5% growth rate might be considered strong in a stagnant market but modest in a rapidly expanding one.