The investment on stocks requires a comprehensive study of a company financial report over the different period. Studying the financial metric helps an investor to analyse the growth and performance pattern of the company. Which ultimately helps them in deciding their investment pattern. There are usually two common forms of metric comparison. "Year on Year" and "Quarter on Quarter". However, still many investors remains in confusion over its usage as growth numbers can be very misleading. I am analyzing a little into this comparison module.
Both the comparision model are essential financial metrics used to analyze growth, but they reveal different aspects of a business's financial health.
YoY (Year-on-Year) = A comparison of a company's financial performance from one quarter or period to the same quarter or period in the prior year.
Example: Q3 FY25 vs Q3 FY24.
The purpose of YoY is to provide a longer-term perspective on growth and eliminate the effects of seasonal fluctuations in business performance.
QoQ (Quarter-on-Quarter) = A comparison of a company's performance between one fiscal quarter and the next consecutive quarter.
Example: Q3 FY25 vs Q2 FY25.
The phrpose of QoQ is to provide a snapshot of short-term performance, helping identify immediate trends, momentum, or downturns.
YoY over QoQ
Many investors get impressed by QoQ jumps over a period of time, but in actual QoQ can be misleading. To get to this conclusion, here are few stock examples who value fluctuates ;
Example 1 – Titan (indian lifestyle brand) - Q3 is festive + wedding season > naturally more sales than Q2.
-
QoQ will show a big jump, but that’s mostly season.
-
YoY tells if they actually grew compared to last year’s festive season.
Example 2 – Zomato
-
Q1 (Apr–Jun) is usually slower than Q4 (Jan–Mar) because there are fewer big-order days.
-
QoQ might show a drop, but that’s just seasonal.
The end result:
QoQ is generally more volatile than YoY, as it is less affected by seasonality but more susceptible to one-time events.
-
QoQ = Mood swings → affected by seasons, festivals, one-time events.
-
YoY = True growth → removes seasonal effects, shows real trend.
Always check YoY before judging a company’s performance.
People may confuse between YOY and QOQ because they are both time based comparisons of performance, but YOY compares a period to the same period in the prior year, while QOQ compares the current quarter to the immediately preceding quarter in the same year. Confusion arises because both metrics are used to track growth and performance, with YOY being better for long-term trends and QOQ for short-term changes and seasonal effects.
In good faith - Peace!!
Posted Using INLEO