Revenue and Earnings Growth (YoY and CAGR)
How much revenue and profit rose compared with the same period last year, and the average annual growth rate over several years.
How to calculate it
Year-over-year growth = (this period − same period last year) ÷ same period last yearCompound annual growth rate (CAGR) = (ending value ÷ starting value)^(1 ÷ number of years) − 1How to read it
- Look at revenue first, then profit. If revenue is flat and profit jumps, the gain usually came from cost cuts or one-time items, which cannot last.
- A single year is distorted by the base. A multi-year CAGR, plus a count of how many years revenue actually fell, is more reliable than the latest quarter.
- Separate organic growth from acquisitions and currency. Many U.S. companies disclose organic or constant-currency growth; use it when available.
Common pitfalls
- Low base effects: profit recovering from a near-zero year can show growth of several hundred percent, which means nothing. When the prior year is a loss, percentage growth cannot be interpreted.
- Acquisitions add revenue in the year they close and the boost disappears the following year.
- Fiscal years differ. Many retailers end their year in late January or early February, and some companies use 52/53-week years, so one year may have an extra week of sales.
- CAGR cannot be calculated when the starting or ending value is zero or negative.
Industry differences
Mature consumer staples may grow low single digits; young software companies can grow far faster. Judge growth against what the industry can sustain, not against a single benchmark.
Where to find it in a 10-K
Income statement for the latest three years (10-K) or the comparable quarter (10-Q). MD&A explains drivers and often breaks out acquisitions and currency effects. For longer histories, combine several 10-Ks or use the SEC's XBRL financial data.
U.S. vs. China reporting
A-share reports show growth in net profit after deducting non-recurring items alongside headline growth, which helps strip out one-offs. In the U.S., the equivalent adjustment is left to investors or to company-defined adjusted figures. Quarterly reporting in the U.S. shows each quarter separately, while Chinese quarterly reports are cumulative year-to-date.