"Year-over-year" is a term that is used to describe the process of comparing the outcome of events that occurred in at least two different annual periods. This approach is often used to compare a recently closed period with one or more previous periods to determine if some type of progress or growth was realized. Making this type of comparison can often provide insight into what types of changes may be necessary to advance the fortunes of a company in an upcoming period.
There are several ways to go about conducting a year-over-year comparison. In some cases, the process will require focusing on a specific period within a calendar year and comparing it to that same period in the last couple of years. For example, a company may choose to compare the number of units sold of a given product during the first quarter of the current year with the sales of that same product during the first quarters of the two preceding years. The comparison can provide valuable clues as to how well the company is maintaining sales within those periods and documenting the amount of growth that took place. Information of this type is often helpful when presenting the company to investors and consumers alike, since it can serve as evidence that the business is healthy and sales are on a steady increase.
When the results of the year-over-year analysis indicate that sales are decreasing rather than increasing, those results may provide the foundation for identifying the reasons behind the shift. While some factors may have been isolated events that are not likely to recur, such as a natural disaster that curtailed demand for the company’s products for a short period of time, the analysis may also point to ongoing factors that need attention if the company is to survive. This in turn can assist in the task of making changes in the general operation of the business, adjusting marketing and sales efforts to compensate for those factors, and generally position the company to improve its figures for upcoming periods.
A year-over-year analysis can also be used by investors to evaluate the profitability of assets that are held in an investment portfolio. In this scenario, the idea is to compare the same periods within several different years to determine if those assets are performing at acceptable levels, or if there are signs of gradual decrease in returns. Identifying the reasons for any changes, positive or negative, from one period to the next can set the stage for making buying and selling decisions that will serve the interests of the investor to better advantage in the coming year, and hopefully lead to a more favorable year-over-year comparison in the future.