Understanding Quarter Over Quarter (Q/Q) Growth, Example

What Is Quarter Over Quarter (Q/Q)?

Quarter over quarter (Q/Q) is a measure of an investment or a company’s growth from one quarter to the next. Q/Q growth is most time and again used to test a company’s growth in source of revenue or source of revenue although it can be used to give an explanation for changes in an monetary machine’s money supply, gross house product (GDP), or other monetary measurements.

Understanding Quarter Over Quarter (Q/Q)

Consumers and analysts examine financial statements, which may well be introduced each once a year or quarterly, to guage the financial smartly being of a company. The quarterly statements are publicly available right through the EDGAR database equipped by means of the Securities and Industry Price (SEC) or a company’s web page, and are known as 10-Q statements. Analysts check out Q/Q numbers and changes when reviewing a company’s potency over a few quarterly classes.

Q/Q is a price of change in potency between one fiscal quarter and the previous quarter. 1 / 4 is typically 3 months or 90 days. Q/Q measures the changes throughout the growth price of quite a lot of financial numbers and metrics came upon throughout the financial statements from one period to the next. Most often, the comparison is between reviews from one quarter of the company’s fiscal 365 days with the reviews from the previous quarter. Q/Q is calculated as follows:

(Provide quarter – previous quarter) / previous quarter

Positive monetary reviews are introduced quarterly and compared to previous quarters to indicate monetary growth or decline. For instance, the gross house product (GDP) report, introduced by means of the Bureau of Monetary Analysis (BEA), is introduced on a quarterly basis and influences the choices of the government, firms, and people.

The report displays how GDP has changed from one quarter to the next and can signal conceivable monetary effects, related to a recession or melancholy, as a recession is considered to be a decline in GDP over two consecutive quarters. Analyzing the change in GDP from quarter to quarter will allow policymakers to make protection adjustments to steer clear of further monetary fallout, as an example, if they are witnessing a declining GDP.

Permutations of Quarter Over Quarter (Q/Q)

Other diversifications of Q/Q are month over month (M/M) and year-over-year (YOY). The month over month measures growth over previous months alternatively tends to be further dangerous than Q/Q as the velocity of change is affected by one-time events, related to natural screw ups. The YOY measures changes in potency in 365 days over the previous 365 days. YOY incorporates further knowledge and thus provides a better long-term symbol of the underlying report decide. The Q/Q price of change is most often further dangerous than the YOY dimension alternatively a lot much less dangerous than the M/M decide.

Exact World Example

The table beneath displays the Q1 and Q2 source of revenue of Intel Corporate and IBM Corporate for 2018.

(in tens of tens of millions)	Intel	IBM
Q1 Source of revenue	$4,500	$1,700
Q2 Source of revenue	$5,000	$2,400
Q/Q change	($5,000 – $4,500) / $4,500	($2,400 – $1,700) / $1,700
	= 11%	= 41%

Provide: IBM, 2018; Intel, 2018

While Intel’s source of revenue grew by means of 11% from the main to the second quarter in 2018, IBM’s source of revenue grew by means of a very good 41% Q/Q. Then again, understand that very best two consecutive quarters have been examined. An investor would examine quite a lot of other quarters to look if the ones changes are a construction or just seasonal or temporary adjustments.

Comparing Q/Q information among companies with different quarter get began dates can distort an analysis—the time built-in would in all probability vary, and seasonal elements would in all probability turn into skewed. An investor will have to consider quite a lot of quarters over a time frame to unravel whether or not or now not changes replicate an ongoing construction or are impacted by means of external elements. It is important for any investor to remove the result of seasonality when they are able to when making comparisons of companies with different quarter get began dates.