Year-on-year vs month-on-month?

Year-on-year vs month-on-month? Mo M, Qo Q, Yo Y

Both month-on-month and year-on-year comparisons are common comparative analysis methods for financial indicators. The quarter-on-quarter cycle includes: Month Over Month, or Month On Month, and Quarter Over Quarter, or Quarter On Quarter. Year-over-year is year-over-year, which in English is Year Over Year, or Year On Year.

The biggest difference between the three is the different values used for calculation: The monthly comparison uses monthly data of different spans, for example, comparing this month with the previous month, or performing compound calculations on the values in recent months.

Quarter-over-quarter comparison is made between this quarter and the previous quarter. Year-on-year comparisons use data from the same period in two years to compare, for example, comparing the value in the first quarter of this year with the value in the first quarter of last year.

Whether month-on-month or year-on-year, the comparison method is to subtract the previous value from the latter value, then divide the previous value, and convert the result into a percentage value, or divide the latter value into the previous value, subtract 1 and then convert it into a percentage value.

Relatively speaking, the month-on-month analysis results are more detailed, and more detailed changes can be found through calculations. For example, they are used to measure various monthly data such as turnover, unemployment rate, and consumer price index.

The year-on-year ratio takes into account the impact of a larger time span and removes some detailed influencing factors, such as quarterly factors. It is usually used to consider more macro data such as annual profits and GDP.

Of course, it can also be used to measure data such as the unemployment rate to examine the significance of numerical changes from different angles. Month-to-month comparison can be used to analyze various more detailed numerical changes, such as stock price growth, company monthly sales revenue, website visits, etc.

Because the monthly chain value is produced every month, during the operation or economic development process, intensive monthly chain value will appear. After being produced into a data analysis chart, the development process of economic activities can be observed more intuitively.

At the same time, monthly comparisons are very suitable for analyzing the business progress of new startups and obtaining the effectiveness of various new strategies in a timely manner, but for mature companies, it makes more sense to use quarterly comparisons or year-over-year comparisons.

The monthly month-on-month value fluctuates greatly as the business progresses, and is easily affected by various events, such as holidays, natural disasters, etc., which will directly affect the calculated monthly month-on-month value.

Therefore, analysts can summarize some information by tracking and analyzing monthly month-on-month values, such as when in a year, sales will surge, and inventory needs to be expanded in advance for future development.

For the basic monthly chain, some people believe that it cannot accurately estimate the return on investment, and then hope to obtain the month-on-month growth rate through data with a longer time span to estimate future revenue. In this case, they will use the compound monthly growth rate (CMGR).

Once CMGR is obtained, investors can use a specific company to estimate the possible future earnings.

CMGR is calculated as: CMGR = (the value of the last month in the cycle)^(1/monthly difference) / (the value of the first month in the cycle) – 1 For example, use CMGR to calculate the compound monthly growth rate of a company's new paid members in the past 5 months: Number of new members per month January 10 february 12 March 20 April 35 May 50 Then the

company’s compound monthly growth rate in these five months is: CMGR = [50^(1/4) / 10] – 1 = 5^(1/4) – 1 = 49% The way to use CMGR to calculate future benefits is: Current month value x (1 + CMGR)^ monthly difference Taking 2 years as the estimated time limit to calculate the number of new members the company can obtain in May after 2 years: Number of new

members = 50 x(1 + 49%)^ 24 = 50 x 1.49^ 24 = 716,870 CMGR can help investors estimate future growth through the growth rate over a certain time span, but there are many limitations when using it:

The calculation result of CMGR will increase exponentially. When the basic value is small, a more reasonable growth amount can be obtained. However, if the basic value is large, the value calculated using CMGR may exceed the income obtained from normal operations.

For example, in the above distance, using 50 new users as the basic calculation value, it is calculated that 716,870 new users will be obtained in the same month after 2 years. However, if the basic value is 500,000, the calculation result is an impossible increase in membership.

When CMGR is used to calculate monthly changes that fluctuate too much, serious evaluation bias will occur. For example, in 5 months, 30 new members were acquired in one month, 60 new members were acquired in the next month, and 90 new members were lost in the next month.

In the case of such excessively fluctuating membership growth, using CMGR will give a relative evaluation value, but it cannot truly reflect the high volatility risk of the business. CMGR is suitable for the calculation of compound interest growth model, but not for the calculation of simple interest growth model.

For some investments that use interest as a source of income, the calculation principle of CMGR applies to compound interest growth, that is, as time progresses, the benefits will grow faster. For simple interest growth, CMGR will provide an incorrect calculation result. 2.

Quarter-over-quarter (QoQ) Quarter-on-quarter refers to the change ratio of various values in a relatively consecutive three-month quarter, such as operating profit in one quarter compared with the previous quarter. Listed companies are required to publish financial reports every quarter, which is the 10-Q report.

Therefore, business managers can use the 10-Q form to conduct quarter-on-quarter analysis of performance to evaluate whether the current strategy has achieved the expected operating income, and timely adjust the operating strategy based on the performance in different consecutive quarters to obtain better operating results.

For example, the quarter-on-quarter growth rate of different products in summer and winter is used to determine the types of products to be sold in different seasons. Investors can use the data in the financial report to perform quarter-on-quarter calculations of various operating indicators.

Regarding stock price trends, some investors will also perform quarter-on-quarter calculations, and estimate whether the stock price will reach a peak or a trough based on changes in the rise and fall ratio, as one of the reference indicators for deciding investment decisions.

Because most economic data and financial data will show quarterly differences, in analyzing changes in various economic and financial values, quarter-on-quarter is used more frequently than monthly-on-month. Especially for companies that have begun to take shape, quarter-on-quarter can provide companies with more valuable financial analysis results. 3.

Year-over-year (YoY) Year-on-year is to consider the growth rate of financial data over a longer period of time, which can be considered year-on-year for one month, year-on-year for one quarter, etc.

Compared with the month-on-month period, the advantage of year-on-year is that it can measure the significance of data changes over a longer time frame, while excluding the impact of some unexpected circumstances on operational capability analysis, or the impact of seasonal factors on financial analysis.

For example, for a company, sales in December increased significantly compared with November. This month-on-month result seems to indicate an increase in the company's profitability, but it is obvious that this result is affected by holidays such as Christmas.

Therefore, we should use December's year-on-year growth to analyze the company's profitability growth, that is, analyze the sales growth rate between December this year and December last year, so as to analyze the company's profitability more fairly under the same background.

Similarly, if month-on-month performance drops by 5% and year-on-year performance increases by 10%, this is good data for a company. The month-on-month decline may be caused by industry characteristics, while year-on-year growth is a reflection of the company's increased profitability.

For the government, central bank and other institutions, year-on-year has the same meaning, that is, to measure economic growth or recession under a similar economic background to eliminate the impact of seasonal factors on the analysis results.

It is often used to analyze consumer price index CPI, gross domestic product GDP, unemployment rate and interest rates, etc.

So the difference between the three is: Month-on-month MoM Quarter-on-quarter QoQ YoY YoY Calculation cycle every month every quarter Every month, quarter or year cycle span consecutive months consecutive quarters Same period in consecutive years Ratio meaning Changes in financial values each month according to the timeline

Changes in financial values for each quarter according to the timeline The same period in consecutive years Ratio characteristics Analyze changes in financial data in great detail; Will be affected by various events; Analyze changes in financial data on a quarterly basis; Can show obvious seasonal changes; Measure changes in financial data over a longer

time span; The impact of unexpected events on data changes can be avoided; It can reflect the significance of numerical changes more comprehensively; How to calculate MoM, QoQ, YOY respectively?

The monthly calculation method is: Month-on-month growth percentage = (this month’s value – previous month’s value) ➗ previous month’s value x 100% The quarter-on-quarter calculation is as follows: Quarter-on-quarter growth percentage = (this quarter’s value – last quarter’s value) ➗ last quarter’s value x 100% The year-on-year calculation method is:

Year-on-year growth percentage = (value for a specific time period this year – value for the same time period last year) ➗ Value for the same time period last year x 100% MoM, QoQ, YOY usage examples? What guidance does it provide for investment? The following calculation is based on the net income in Apple's 10-Q financial report.

Here are Apple's income statements for the first quarter of 2022 and the fourth quarter of 2021: It can be seen from the financial report: Net revenue for the first quarter of 2022: $25,010 M Net revenue for the first quarter of 2021: $23,630 M Net revenue for the fourth quarter of 2021: $34,630 M So, for the net income amount for the first quarter of 2022:

Quarter-over-quarter = ($25,010 M – $34,630 M)/ $34,630 M x 100% = -27.78% Year-over-year = ($25,010 M – $23,630 M)/ $23,630 M x 100% = 5.84% It can be seen from the calculation results: On a quarter-on-quarter basis, Apple's net income declined in the first quarter of 2022.

This may be related to various holidays in the fourth quarter, such as Black Friday, Christmas, etc. The 27.78% change rate shows that Apple has achieved good sales volume in the 2021 major promotion activities. Based on year-over-year analysis, net income increased in the first quarter of 2022.

This shows that Apple's sales capabilities have increased in a similar sales environment. For investors, although the quarter-on-quarter growth rate declined in the first quarter, overall Apple's profitability is still increasing, and because Apple is a mature and large company, it can still be considered for inclusion in one's investment portfolio.

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