One of the most important things that companies care about includes growth. They will always want to know whether they improved or not. A year-over-year is one of those measures that can help them understand how they have faired every year. It can be defined as something that compares two or more events that can be measured every year. For instance, a year-over-year, which is also known as year-on-year or YOY, can be a measure that compares a similar quarter of one year to the succeeding year.

Why use a YOY analysis?

The apparent reason would be to find out about a company's financial performance. Did it perform well, worse, or the same? It can also be applicable to the performance of the company's investments. What did we mean about the measurable events that we mentioned earlier? These events are the ones that repeat every year. Hence, we can compare them on a year-on-year basis. To name a few examples, we have monthly, quarterly, and annual performances.

The YOY and QOQ

If there is a given set of data of measurable events, a YOY can cross-compare them. For example, an entity like an analyst or even an investor can compare the Q1s of a company to measure or get an idea about their progress. For instance, an analyst can compare Company A's Q1 from 2019, 2020, and 2021. In those three years, the analyst can tell whether the company performed well, worse, or the same financially.

Another analysis called QOQ or quarter-on-quarter compares two of the company's succeeding quarters in the same financial year. For instance, 2019's Q1 is compared with 2019's Q2. It can also be a comparison between Q2 and Q3 or Q3 and Q4. While this is a more detailed view, most people prefer using the YOY because it provides the bigger picture, and there is no need to make adjustments for the seasonal sales like downturns and uptrends that do not happen regularly.

Why do other people prefer YOY over any other analyses?

Since we already defined

what QOQ means, you might already know why people would always prefer the YOY

any day. Most people prefer YOY because there is no need to worry about the

seasonality factor, which impacts businesses. Products will always have peak

and low-demand seasons. For instance, the peak season of jackets and coats is

during winter. They have low demands during summer. However, there are still

sales throughout the year. The sales and profits change depending on the time

of the year. This is why most prefer YOY because it removes that seasonality

factor for the products and services. Hence, we see the bigger picture and not

just a part of the story. If we assume that an investor looked at a quarter

during peak season and compared it to a regular quarter, he might think there

was a significant decline. The same is true if the investor compared a quarter

during a low-demand season with a typical quarter. There might be a wrong idea

about the revenue and sales

What is a year-over-year analysis, and why do most people prefer it?