Year-Over-Year (YOY) is a frequently used financial evaluation and assessment to compare two or more quantifiable events on an annualized basis.
A YOY calculation compares statistics for one period to the same period the previous year, and this period is for a month or quarterly basis. The year-over-year is used to calculate growth rate and proportion change for the past year.
Year-over-year (YOY) is a financial analysis that businesses use to achieve insight into the company’s success. It is necessary as an investor, a real estate investor precisely, a financial professional, board member, executive or business owner to have a clear understanding of year-over-year.
The Benefits of Year-Over-Year
Year-over-year (YOY) is an effective way of monitoring growth because it eliminates the effects of seasons. For instance, if your business revenue augmented to 20% in the previous month, before you break out the bubbly, check it in contrast to the income from the same month of the last year on your income statement.
You might discover that your sales always rise at that particular time of year. On the other hand, if sales typically increase by 35% this month, your revenue is down year-over-year. Your business is doing worse, not better.
Furthermore, YOY distinguishes long-term trends. For instance, a business is growing at a steady rate of 2% a month, and it grew 3% a month last year; it will be down when compared year-over-year.
One of the reasons YOY is an essential metric in commercial real estate investing statistics is that it helps to give an account of instabilities in seasonality when analyzing performance. It also offers an objective view of overall performance.
The benefits of planning your year-over-year growth go beyond offering you a starting point display of success. However, most investors can use this calculation as a starting point to determine inadequacies in spending money, price discrepancies, or logistical matters that might be consuming revenues over time.
Other benefits of YOY include:
- Minimizes the effects of seasonality on forecasts by comparing two stagnant points in time
- Actualizes unstable values by relating overall fallouts
- It offers a modest calculation the majority can do effortlessly
- Outcomes are structured as percentages for easy understanding, comparison and also drawing quick intuition from
- Can help you determine the best cities for commercial real estate investment
Why Use Year-Over-Year
YOY is a remarkable statistic to use to control the effects of instability between seasons.
Real estate investors must use YOY to understand their financial status, as it also helps to compare growth over the previous 12 months. With the year-over-year growth formula, you and your stockholders can compare two metrics within a given period, such as proceeds over a yearly, quarterly, or monthly basis.
However, a year-over-year growth projection gives you a top-level gaze at whether your investments beat last year’s performance, thus making seasonal business instabilities look less terrible. In addition, YOY gives you broad insights to determine if your interim goals are prominent to lasting success.
Example of Year-Over-Year
If a firm stated earnings-per-share of $11.00 in economic 2021 and earnings-per-share of $10.00 in economic 2020, it achieved year-over-year growth of 10% (The math: $11/$10 – 2 = 0.1 = 10%).
YOY comparison is appreciated for investment portfolios as investors are fond of examining YOY presentations to see how their performance changes over time.
Concisely, the YOY progression rate is a percentage change of the growth you had in the current year compared to the previous year and an increase or decrease in the performance capacity you evaluate.