Quarter on Quarter (QOQ)

What Is Quarter on Quarter (QOQ)?

Quarter on quarter (QOQ) is a measuring technique that works out the change between one fiscal quarter and the previous fiscal quarter. The term is like the year-over-year (YOY) measure, which compares the quarter of one year, (for example, the primary quarter of 2020) to a similar quarter of the previous year (the principal quarter of 2019). The measure gives investors and analysts a thought of how a company is developing over each quarter.

Grasping Quarter on Quarter

QOQ permits a business to monitor shorter-term changes and to advance toward objectives or benchmarks set for the year. It can give important data with respect to how a company is performing and permit the company to answer and make process changes whenever required.

Frequently, the QOQ measure is utilized to compare the earnings between quarters. For instance, ABC Company's first-quarter earnings were $1.50 per share, and its second-quarter earnings were $1.75 per share. By working out the QOQ growth between quarters ($1.75 - $1.50/$1.50), obviously the company has developed its earnings by 16.6%, which is a positive marker for investors.

Quarter on Quarter in Practice

When utilized in financial or accounting principles, a quarter is a back to back three-month period soon. Generally, the main quarter (Q1) alludes to January, February, and March. Each subsequent three-month period addresses Q2, Q3, and Q4.

When utilized as part of a QOQ analysis, a business would compare financials from Q2 (April, May, June) to Q1 (January, February, March). This comparison differs from YOY where a similar quarter is compared over time. For instance, Q1 of 2019 is compared to Q1 of 2018 in a YOY survey.

Contrasting quarters on a year-over-year (YOY) basis can be more effective than on a quarter on quarter (QOQ) basis, as it gives a more extensive image of company wellbeing and isn't influenced via seasonal issues.

Challenges with QOQ Analysis

There are conditions where QOQ analysis may not give a comprehensive perspective on the soundness of an organization. For instance, in the event that an industry encounters [seasonal sales variance](/seasonal-industry, for example, greens keepers or seasonal sellers, what might give off an impression of being a descending trend might be an industry standard. The equivalent can apply in the event that a business encounters higher earnings during a pinnacle season that might reflect strangely high growth starting with one quarter then onto the next. An organization might decide to change the figures seasonally and make up for standard changes in business giving a more accurate picture over time. Since YOY analysis includes the examination of a similar quarter over time, it doesn't normally need a seasonal adjustment to give significant data.

Certifiable Example

A company's earnings report starting with one quarter then onto the next can influence the market. A frustrating earnings report can make the stock plunge as investors try to sell off the stock before the price drops.

In 2018, Amazon's second from last quarter earnings surpassed analysts' assessments, however Amazon's guidance for the fourth quarter missed the mark regarding expectations, and the company's stock price plunged in response to the announcement. The last quarter of the year incorporates special times of year and is normally Amazon's most active season. Fourth-quarter revenue guidance was essentially below the consensus and caused concern among shareholders. Amazon stock plunged by 10%, despite the fact that it ultimately recovered as investors priced in the news.

Highlights

• QOQ compares a change in performance between one fiscal quarter and the previous fiscal quarter.
• Businesses that have income changes or pinnacle earnings at certain times might have to make seasonal adjustments or utilize a YOY metric to measure performance.
• QOQ reflects short-term changes in different metrics and can demonstrate company performance over two quarters.