Why I Always Compare a Quarter to Last Year

2026-07-12 · By Lubin Danilo, founder of Lubin Investment

Comparing a quarter's revenue to the quarter right before it can make you believe in a collapse or a surge that doesn't really exist, because of a business's normal seasonality. I systematically compare a quarter to the same quarter the previous year, the only way to judge a real trend without falling for a calendar trick.

The trap of the prior quarter

Many people instinctively compare a company's latest quarterly results to the quarter right before, known as a QoQ (quarter over quarter) comparison. The problem: many businesses don't operate uniformly throughout the year. If a company does most of its business between July and September, comparing that quarter to the next one (October to December, quieter) will give the impression of a collapse every single year, without anything actually going wrong in the business.

A real example: online travel

Take Booking Holdings, the parent company of Booking.com. A large share of summer travel bookings naturally concentrates in the third quarter (July to September), peak tourist season in the northern hemisphere. Comparing fourth-quarter revenue to third-quarter revenue would almost always show a marked decline, every year, without signaling any real slowdown in the business. It's simply the natural rhythm of a seasonal business. You can check the full analysis of Booking Holdings to see how this kind of seasonal business is judged in my screener.

The right comparison: the same quarter, one year earlier

That's why the standard reference in financial analysis is a YoY (year over year) comparison: comparing third-quarter 2026 to third-quarter 2025, not to second-quarter 2026. This method neutralizes the seasonal effect since you're comparing equivalent calendar periods. If third-quarter revenue grows 12% compared to the same quarter a year earlier, that's a genuine growth measure, not a calendar artifact.

When the prior-quarter comparison is still useful

The QoQ comparison isn't useless, though: it helps spot a recent inflection, an acceleration or slowdown that has just started, especially for businesses with little seasonality (a subscription software company with revenue spread evenly across the year, for instance). But as soon as a business has a strong seasonal rhythm (travel, retail, agriculture, heating energy), the YoY comparison must take priority, or you risk drawing a false conclusion from a simple calendar effect.

How I apply this in my method

Every growth criterion in my screener (sales growth, free cash flow per share growth) is calculated over several rolling years, never quarter against the prior quarter, precisely to avoid this bias. When I analyze a company's reaction to quarterly earnings, I systematically look at the change versus the same quarter a year earlier, and I check whether the trend across several consecutive quarters (each compared to a year earlier) is consistent before drawing any conclusion about the quality of the dossier.

Comparing a quarter to the prior one (QoQ) can make you believe in a collapse or surge that doesn't exist, because of seasonality
Real example: online travel, where the 3rd quarter (summer) is naturally stronger than the 4th in the northern hemisphere
The right reference is the YoY comparison (same quarter, one year earlier), which neutralizes the seasonal effect
The QoQ comparison stays useful for businesses with little seasonality and to spot a very recent inflection
My method calculates every growth criterion over several years, never quarter against the prior quarter

FAQ

What is a QoQ comparison?

QoQ means quarter over quarter: it compares a quarter's results to those of the quarter right before. Useful for spotting a recent inflection, but misleading for any seasonal business.

What is a YoY comparison?

YoY means year over year: it compares a quarter to the same quarter the previous year (for example Q3 2026 versus Q3 2025). It's the standard reference for judging a real trend without seasonal bias.

Are all companies affected by seasonality?

No. A subscription software company with recurring, evenly spread revenue is barely affected. But travel, retail, agriculture, or heating energy have strong seasonal rhythms where the YoY comparison is essential.

How do you know if a company's business is seasonal?

By looking at its quarterly results history over several years: if the same quarter is consistently stronger or weaker than the others, year after year, the business is seasonal and the YoY comparison is required.

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About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).