📝 CAGR vs YoY Growth: What’s Better?

📝 CAGR vs YoY Growth: What’s Better? Imagine you planted a small tree 🌱. After 1 year, it grew 5 inches. But after 3 years — it was 20 feet tall! 🌳 Now you wonder — how fast did it really grow each year? 🤔 This is where CAGR and YoY Growth help you understand growth clearly! 📈 🔍 What is YoY Growth? ✔️ YoY = Year on Year Growth It simply shows how much something grew compared to the last year. Example: ✔️ If a company made ₹100 last year and ₹120 this year — YoY growth = 20%. So YoY says: 👉 “How much did it grow compared to the previous year?” 🔍 What is CAGR? ✔️ CAGR = Compound Annual Growth Rate It shows the average yearly growth rate over many years — as if the company grew steadily every year by the same percentage. Example: ✔️ If a company made ₹100 five years ago and ₹200 today — CAGR tells you: 👉 “By how much did it grow every year, on average, to reach ₹200?” So CAGR says: 👉 “What was the smooth, steady yearly growth over time?” 🤔 Difference Between YoY & CAGR: 🎯 1. Time Period: ✔️ YoY = 1 year change only 🗓️ ✔️ CAGR = Average growth over multiple years 🕰️ 🎯 2. Useful for: ✔️ YoY: Short-term performance (last 1 year) 🚀 ✔️ CAGR: Long-term performance (3, 5, 10 years) 📆 🎯 3. Can YoY be Misleading? Yes! 😲 ✔️ One bad or good year can make YoY look strange. ✔️ Example: One lucky year = high YoY 📈, but not always the truth! 🎯 4. CAGR = Smoother & Clearer for Long Term! ✔️ Shows real average performance over time. ✔️ Removes temporary ups and downs. 💡 Simple Example to Understand: A company made profit like this: ✔️ Year 1: ₹100 ✔️ Year 2: ₹200 (Wow! +100% YoY!) ✔️ Year 3: ₹150 (Oops! -25% YoY) If you see YoY, you may feel confused 😕 — up, then down. But CAGR says: 👉 “Relax! The average growth over 3 years is about 22% CAGR.” That’s clearer! 😊 ⚠️ So What’s Better — CAGR or YoY? ✔️ For short term (1 year performance)? = YoY is useful ✅ ✔️ For long term (3+ years)? = CAGR is better ✅ ✔️ For understanding consistency? = CAGR is better ✅ ✔️ For checking recent improvement or trouble? = YoY is better ✅ 🏆 Final Verdict: ✔️ Both are important! 🎯 ✔️ Use YoY to see what happened this year. ✔️ Use CAGR to see how the company grew over time. 👉 A smart investor checks both before deciding! 🧐💡 ✨ Final Thought: YoY is like checking your weight change this month 📅. CAGR is like knowing how your fitness improved over 5 years! 🏋️‍♂️ For a strong, confident decision — always use both! 💪😊