Revenue growth (YoY)

The growth rate formula is the ending value minus the beginning value, divided by the beginning value, then multiplied by one hundred to express it as a percentage. Applied to a single year, this is called year-over-year growth; applied to revenue, it reads as the change in a company's annual sales against the year before — the simplest, most widely applicable measuring stick in financial analysis, usable on almost any figure that repeats period after period.

The same underlying idea has a second, multi-year shape. Where year-over-year growth compares exactly two adjacent periods, the compound annual growth rate, CAGR, measures the smoothed annual rate that would carry a starting value to an ending value over several years if it grew by the identical percentage every single year: the ending value divided by the beginning value, raised to the power of one over the number of years, minus one. CAGR is a geometric average, not an arithmetic one, and the distinction is not academic: a business that grows forty percent one year and loses twenty percent the next has not grown at an average of ten percent, because losses and gains do not offset symmetrically once compounding is involved — the geometric CAGR over those two years is meaningfully lower than the simple average of the two yearly figures suggests.

The formula has one structural weakness that a value investor has to watch for: it depends entirely on the starting value being a genuine, positive base. A company swinging from a loss to a profit produces a growth-rate calculation that is mathematically undefined or wildly misleading — dividing by a negative or zero base does not produce a meaningful percentage, whatever number the arithmetic happens to spit out. Moatkeep marks a growth figure as not-meaningful whenever the base period was zero or negative, rather than displaying a nonsensical or sign-flipped percentage that looks like real information but is not. The same caution applies at the other extreme: a company recovering from a single terrible year can show a huge, headline-grabbing percentage gain the following year purely from the low base, a base effect that says more about the prior year's weakness than about current momentum.

The identical formula applies to revenue, earnings per share, net income, free cash flow and dividends per share — the mechanics never change, only the meaning does. Revenue growth speaks to demand and market share; earnings and free-cash-flow growth speak to whether that demand is actually converting into profit and cash; dividend growth speaks to a management's confidence in sustaining a higher payment. Reading a single year in isolation is the most common misuse of the formula: one exceptional year followed by a difficult comparison can print a misleadingly negative growth rate the following period even while the underlying business is perfectly healthy, which is why a multi-year run, three-year CAGR alongside the latest year-over-year figure, tells a far more honest story than either number alone.

Moatkeep computes year-over-year growth as the exact formula above and computes CAGR over a fixed multi-year span, both off a point-in-time, restatement-aware fiscal-year spine built from each company's own filings. The comparison year must be exactly the right number of fiscal years behind the latest one — a missing or mislabelled year yields no growth figure at all rather than a jump computed across the wrong span — and both periods must be reported in the same currency, since a presentation-currency switch would otherwise turn an honest calculation into a meaningless one. A negative base always renders as not-meaningful, and every growth figure carries the fiscal period it was measured from.

The growth rate formula is a measuring stick, not a verdict on its own: it states what happened between two points without explaining why, and a single favourable reading proves nothing about whether the pace can continue. For a value investor, the more useful habit is reading several years of the same formula side by side — the trend, and the consistency of the trend, is where the real signal about a durable, compounding business actually lives.